The law states that employers must consult with their employees before making them redundant unless there are “special circumstances”. The Employment Appeal Tribunal (EAT) has confirmed in Carillion Services Ltd and ors v Benson and ors that just because a circumstance makes it difficult for an employer to comply with the obligation to consult it does not, in and of itself, make it special.
Thompsons was instructed to represent Unite the Union and approximately 100 members who were made redundant following the collapse of the Carillion group of companies.
Basic facts
In 2016, Carillion plc, a multi-national company, had a turnover of £5.2 billion. By July 2017 or thereabouts, it started to experience serious financial difficulties and went into liquidation on 15 January 2018. At that time, it had about 18,000 employees in the UK.
The claimants, who were dismissed on various dates after 15 January, issued claims for protective awards under section 189 of the Trade Union and Labour Relations (Consolidation) Act (TULRCA) on the basis that the company had failed to consult with them, contrary to section 188 TULRCA.
The company accepted that they had failed to consult but argued that they could rely on the “special circumstances” defence under section 188(7) TULRCA, which meant their only obligation was to take steps that were “reasonably practicable”. This followed what the company referred to as “sudden intervening events” when its key stakeholders took the decision on 14 January 2018 that the short-term lending arrangements sought by the company were contingent on government guarantees which were refused.
Tribunal decision
The tribunal found that the Board's decision to put the company into compulsory liquidation on 14 January meant that employees would inevitably be dismissed on the ground of redundancy. The duty to consult under section 188 TULRCA was therefore triggered on that date.
It then had to consider whether there were “special circumstances” that applied. According to the lead authority of Clarks of Hove Ltd v Bakers Union the event relied on must be "out of the ordinary, something uncommon". The Court of Appeal also made clear in that case that insolvency would not automatically constitute a special circumstance. If a sudden disaster occurred which forced a company to close down, that would satisfy the definition, but if the insolvency was due to a gradual run-down of the company, then it would not.
Looking at the events from 10 July 2017 until 15 January 2018, the tribunal found that the overall picture was of a business on a downward path from July 2017 until it went into liquidation in January 2018. As such, there was nothing “sudden” about Carillion’s insolvency. Although it was not clear what was in the company’s mind in the critical period of the last weeks preceding the liquidation because of a lack of evidence, it was apparent that by 31 December 2017, at the very latest, Carillion knew that it did not have the funds for administration and was therefore at risk of going into compulsory liquidation.
EAT decision
Dismissing the appeal, the EAT held that “the mere fact that a circumstance has an effect on the ability of an employer to comply with an obligation to [consult under] … TULRCA does not render it special”. Otherwise, every employer would be able to rely on the “special circumstances” defence by pointing to a factor that made it difficult or impossible for them to comply.
Even if dismissal cannot be avoided in a particular instance, the EAT emphasised that employers should still consult about mitigating the consequences of those dismissals. For instance, the obligation to consult under section 188(4) includes a requirement to provide information on a wide range of matters, all of which would be highly relevant “to an employee facing the distressing prospect of being made redundant, even if the fact of dismissal itself could not be avoided”.
Comment
This case confirms that Clarks of Hove Ltd v Bakers Union remains good law and that company insolvency will rarely amount to a special circumstance, even in a situation such as Carillion’s, where the company was unable to obtain support from its financial backers or the government, which resulted in its collapse. Therefore, the duty to consult still applied.