Employment Alert No. 72 - Redundancy - Collective Consultation - Special Circumstances Defence
August 12, 2003
THE WITHHOLDING OF RELEVANT INFORMATION BY A PARENT COMPANY IS NOT A "SPECIAL CIRCUMSTANCE" MAKING IT NOT REASONABLY PRACTICABLE FOR A SUBSIDIARY COMPANY TO COLLECTIVELY CONSULT REGARDING REDUNDANCIES
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Introduction |
In the recent case of GMB & Amicus (AEEU & MSF) v Beloit Walmsley Ltd (EAT/1094/02/RN), the Employment Appeal Tribunal considered the circumstances in which an employer which is proposing to make multiple redundancies will be able to argue that there were "special circumstances" which made it not reasonably practicable to comply with its obligations under s.188 TULR(C)A to collectively consult with appropriate employee representatives.
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What did the EAT decide? |
The Respondent company (the "Company") was a subsidiary of an American company which applied for protection under Chapter 11 of the United States Bankruptcy Code in June 1999. The parent company withdrew financial support in November 1999 which came as a "bolt out of the blue" for the Company. The Company was placed in administration and a large number of redundancies followed shortly thereafter. Only very limited consultation concerning such redundancies took place.
It was conceded that the requirements to collectively consult had not been complied with but the Company argued that there were "special circumstances" which rendered it not reasonably practicable for the company to have consulted - i.e. the failure of the parent company to notify the Company of the withdrawal of financial support until the last moment.
The EAT held that the 'special circumstances' defence was not available to an employer where its parent company did not pass on the relevant information to it in good time. The relevant information was the decision by the parent company to take action from which redundancies at the subsidiary were at least contemplated, i.e. applying for protection under Chapter 11. It was not necessary that the details of the redundancies were known at the time (e.g. the numbers, locations, etc).
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What does this mean for employers? |
This case avoids a possible loophole in the legislation whereby a parent company (whether based in the UK or not) can hide information from its subsidiary, which is the employing company, in order to create a "special circumstance".
This decision demonstrates to parent companies that it will not benefit subsidiaries to withhold relevant information about, for example, the withdrawal of financial support or impending insolvency/administration. To assist the subsidiary to comply with its obligation to collectively consult, information should be provided as soon as possible. Of course, the early provision of such information may conflict with the parent company's own aims and interests.
Subsidiary companies should, in order that they are able to comply with their duty under s.188 TULR(C)A, encourage parent companies to share information and inform them of decisions which may lead to redundancies at the subsidiary company. There is no benefit to be gained by the subsidiary by being "kept in the dark" by the parent company.
This decision encourages better avenues of communication between parent and subsidiary companies where decisions are taken which may lead to collective redundancies at the subsidiary companies.
