Appeal No.  UKEAT/0350/07/CEA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 23 October 2007

Before
HIS HONOUR JUDGE McMULLEN QC
			MR D EVANS CBE
			MR T MOTTURE

MR P HUTCHINS	    APPELLANT

PERMACELL FINESSE LTD (IN ADMINISTRATION)	   RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	Mrs J Sefton
(of Counsel)
Instructed by:
Rowley Ashworth Solicitors
247 The Broadway
Wimbledon 
London
SW19 1SE	
For the Respondent	No appearance or representation by or on behalf of the Respondent 	

SUMMARY
Redundancy
Protective award
When considering the protective award to the Claimant for grave failure by the Respondent in administration to comply with the regime relating to proposed redundancies, the Employment Tribunal started at 30 days.  It should have applied Susie Radin and started at 90 days.  There being a total failure to consult and no mitigating circumstances, the Employment Tribunal erred and the EAT on invitation from the sole represented party substituted 90 days’ protective award UK Coal Mining v NUM applied. 

HIS HONOUR JUDGE McMULLEN QC

1.	Long before the United Kingdom acceded to the European Union, trade unions were being consulted and engaged in negotiations about redundancies of their members in workplaces.  This was done by collective agreement.

2.	Since the passing of the Employment Protection Act 1975, transposing into UK law obligations imposed by the Collective Redundancies Directive 1975, there has been an obligation to consult with representatives ahead of decisions to make employees redundant.  The particular form of the obligation has changed following infraction proceedings brought against the United Kingdom and subsequent amendments to the UK legislation and to the directive.

3.	The framework remains constant.  An employer proposing to make redundancies must provide information in advance and consult appropriate representatives.  If it fails to do so, relevant employees can be awarded a protective award following applications made either by their representatives or, in certain circumstances, by themselves to an Employment Tribunal.  

4.	This case is about the amount payable following a finding of a failure to comply with the relevant consultation procedures.  The judgment represents the views of all three members.  We will refer to the parties as the Claimant and the Respondent. 

Introduction
5.	It is an appeal by one of the original Claimants in the proceedings against the judgment of an Employment Tribunal sitting at Stratford, registered with reasons on 18 April 2007, under the Chairmanship of Ms VK Gay.  The Claimant is today represented by Ms Joanna Sefton.  The Respondent was in administration.  Leave had been sought and given to maintain proceedings against it.  The administrators took no part in the proceedings and were debarred as they have been at our hearing.  

6.	The Claimant claimed a protective award following the failure by the Respondent, his employer, to comply with the regime.  The essential issues were defined by the Employment Tribunal, only one of which is live before us, and that is the amount of the protective award.  The Tribunal decided that he should be entitled to 30 day’s pay, giving him £2,742.  The Claimant appeals against that, contending that he should have been awarded 90 days’ pay, which yields a sum of £8,226.  Directions sending this appeal to a full hearing were given in Chambers by Wilkie J.

7.	The practical utility of this claim against an insolvent employer has been pointed out to us by Ms Sefton in that the award can be made.  It is not subject, apparently, to the statutory cap of £310 in a week’s pay provided for by section 227 of the Employment Rights Act 1996.  It appears to be one of the rights which can be maintained in the absence of a solvent employer against the Secretary of State pursuant to part XII of the 1996 Act, see section 184(2)(d).  The Claimant’s expectation here is that the award made by the Tribunal and to be made by us would have real value to him by that statutory guarantee route.

The legislation
8.	As originally enacted to comply with the directive, section 99 of the Employment Protection Act 1975 imposed obligations on an employer proposing to dismiss as redundant either 100 or more employees within 90 days; or between 10 and 100 within 30 days.  The obligation is to consult.  The consultation period matched the period during which dismissals would take place, that is, 90 and 30 days, and failures to comply with such orders would lead to a declaration which would be either 90 days or 30 days or, in any other case, 28 days.

9.	Thus, there was a linkage between the consultation period and the protected period.  The Trade Union and Labour Relations (Consolidation) Act 1992 section 188, as amended from 1 November 1999 by the Collective Redundancies and Transfer of Undertakings Protection of Employment (Amendment Regulations) 1995 and 1999, provides as follows:  
“(1) Where an employer proposing to dismiss as redundant 20 or more employees at an establishment within a period of 90 days or less, the employer shall consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be affected by the proposed dismissals or who may be affected by measures taken in connection with those dismissals.

(1A) The consultation period shall begin in good time and in any event – 
(a)	where the employer is proposing to dismiss 100 or more employees … at least 90 days, and
(b)	otherwise at least 30 days
before the first dismissal takes effect”

10.	The obligation is to consult appropriate representatives who, on a descending scale, are representatives of independent trade unions, representatives elected amongst affected employees for the purposes of the regulations, or for other purposes.  Where there is none, an obligation is imposed upon an employer to conduct elections so that there can be such representatives to be the conduit for the provision of information and the consultation, see section 188(a).

11.	The obligation remains to consult where there is a proposal to dismiss 100 or more employees for which the consultation period is 90 days and otherwise it is 30 days before the dismissal takes effect.  However, there is disengagement when it comes to the protected period because section 189(4) defines it as follows:   
“(4) The protected period— 
(a) begins with the date on which the first of the dismissals to which the complaint relates takes effect, or the date of the award, whichever is the earlier, and 
(b) is of such length as the tribunal determines to be just and equitable in all the circumstances having regard to the seriousness of the employer’s default in complying with any requirement of section 188; 
but shall not exceed 90 days.”

12.	The effect of the changes is to preserve the distinction in the minimum consultation periods according to the number of employees involved, but to scrap the distinction in respect of the protective award, as is made clear by Ms Sefton in her argument, which we accept in full.  It is now open to an Employment Tribunal to make the full award of 90 days, irrespective of the number of employees affected.  The Tribunal directed itself to those provisions.  

The facts
13.	Mr Hutchins was employed by the Respondent as a supervisor, for which he was paid £32,400 pa.  He was a member of Amicus, which was not a recognised trade union for collective bargaining or consultation.  It was a party to the proceedings but subsequently withdrew.  Redundancies were announced to the workforce, peremptorily, by means of, in Mr Hutchins’ case, a telephone call calling him into a meeting on 18 May 2006.  Although the numbers were not clear for the Respondent had entered no appearance, the Tribunal found that there were at some stage 77 potential redundancies but, doing the best it could, there was a proposed redundancy of between 20 and 100 people during 90 days, and that triggered the obligation.

14.	Mr Hutchins was one of those affected and he lost his job.  The Tribunal found that the minimum consultation period was 30 days in respect of this number and there was a breach of section 188 because the Respondent had made no provision for the election of employee representatives and thus was unable to consult with them.

15.	The eligible claimants are, in reverse order this time: any employee who is affected; an employee representative; a trade union representative; or any other affected employees.  So, there is a right of individual access to the Employment Tribunal, which the Tribunal upheld. Mr Hutchins was affected and was dismissed and so was entitled to bring proceedings under section 189(1).  

16.	It then turned to the amount to be awarded and it said this:
“7.  In respect of the financial remedy, the Tribunal observes that the Susie Radin case related to the dismissal of more than 100 employees in respect of which the consultation period was a minimum 90 days.  In the present case, the consultation period was a minimum 30 days.  The language of Spillers French, to the effect that the Tribunal may be concerned with the number of consultation days lost, has been deprecated by the Court of Appeal, in part because it was said that there is no basis for making the calculation.  This Tribunal considers that the loss of the statutory minimum consultation period of 30 days is fairly clear in the present case.  We recognise that there was a very grave breach in this case: there was no compliance at all, so far as we are aware with any election/consultation requirements.  The administrator has not chosen to present any material that might have explained how suddenly matters came upon the Respondent and/or whether there was legal advice available.  In the absence of such evidence, we do not find any mitigating features.  We are aware that insolvency alone is not a special circumstance but in any event, although we know that the Respondent has become insolvent, the special circumstances defence has not been advanced before us.  So we are faced with a grave breach.  We must find an appropriate sanction, since we recognise that the purpose of the protective award is to punish the employer rather than to compensate the employee.  We also recognise that the words of the regulations requires us to make such award as is just and equitable in the circumstances and that other cases have indicated that the award should not be oppressive.
“8.  The Tribunal considers (and Mr Margo agreed) that the sanction imposed by the criminal courts upon a driver who was caught driving at 90 miles an hour in a 20 mile an hour zone, would be very much greater than the sanction imposed upon a driver who was speeding at 30 miles per hour in the same zone.  It would be considered just and equitable for the sanction to make a distinction between the different degrees of wrong done in those circumstances.  It would appear oppressive to make the driver who was ten miles above the speed limit pay as much as the driver who was 70 miles above the speed limit.  We consider that this example of justice and equity is useful to us in the present case.  However grave the wrong committed by the Respondent, it did not have as wide or serious an adverse effect as would have been the case if 100 or more employees had been deprived of a minimum of 90 days consultation.  We invited Mr Margo to provide us with authorities in respect of the appropriate protected period where fewer than 100 employees had been dismissed.  He was unable, even after an adjournment, to do so.  Our researches did not reveal any such authority.  In the circumstances, we consider that a useful guideline is that the maximum 90 days exactly matches the intended minimum consultation period where 100 or more employees are dismissed.  In respect of this case where the intended minimum consultation period is 30 days, we consider that the grave breach here is properly reflected, on a basis that is just and equitable, by the sanction of a 30 day protected period.  This does no hardship or injustice to Mr Hutchins, who is receiving a boon if the Tribunal is not to consider it as compensation, and is not oppressive to the Respondent.  We calculate four weeks and two days pay as £2,742.”

17.	It awarded the Claimant the sum of £2,742 for 30 days’ protected period.  

Discussion
18.	The starting point for consideration is the judgment of Peter Gibson LJ in Susie Radin Limited v GMB & Ors [2004] ICR 893, where he said the following:
“45.  I suggest that employment tribunals, in deciding in the exercise of their discretion whether to make a protective award and for what period, should have the following matters in mind.  (1) The purpose of the award is to provide a sanction for breach by the employer of the obligations in s188: it is not to compensate the employees for loss which they have suffered in consequence of the breach.  (2) The tribunal have a wide discretion to do what is just and equitable in all the circumstances, but the focus should be on the seriousness of the employer’s default.  (3) The default may vary in seriousness from the technical to a complete failure to provide any of the required information and to consult.  (4) The deliberateness of the failure may be relevant, as may be the availability to the employer of legal advice about his obligations under section 188.  (5) How the tribunal assess the length of the protected period is a matter for the tribunal, but a proper approach in a case where there has been no consultation is to start with the maximum period and reduce it only if there are mitigating circumstances justifying a reduction to the extent which the tribunal consider appropriate.”

19.	The approach to regard this as penal is clear, whereas it had not been clear in TGWU v Morgan Platts Limited (in Administration) UKEAT/0646/02, a judgment of HHJ Peter Clark and members.  The EAT’s attention focused upon the then comparatively recent change in the law but it was decided that there would be no departure from the compensatory approach, as it was then felt to be correct. The EAT overruled the Employment Tribunal for having erred in law in taking the 30 day minimum consultation period as its starting point.  The correct starting point was 90 days and since no mitigating circumstances were found by the Employment Tribunal there was no warrant for making an award based on less than 90 days, and the EAT substituted that approach.  As it turned out, that was precisely the result adopted by the Court of Appeal in Susie Radin, then with the addition of the penal sanction.

20.	The Tribunal in our case has been influenced by the consultation period (30 days) for this number of employees (less than 100), in the assessment of the protected period (90 days) for which an award should be made.  It paid attention to an analogue of the speeding driver, cited above in paragraph 16.  Ms Sefton contends, and we agree, that this is not an apt comparison for in the field of collective redundancies we are dealing with awards made to more than one employee for an obligation owed to employees collectively.  In any event, in the analogue, both drivers are under the same obligation, that is, to drive at the appropriate speed limit.

21.	We respectfully disagree with the reasoning and hold that taking the starting point as reflective of the consultation period is an error.  There is now no specific link between the consultation period and the protected period.  In order to give effect to that change in the duty, it is now the law that on a failure to comply with the consultation regime in respect of any number of affected employees, consideration of the protected period should begin at 90 days.  Applying the guidance given in Susie Radin, the Tribunal should then work downwards to take account of such consultation, or other mitigation, as there was.

22.	This has occurred in two cases.  In Leicestershire County Council v Unison [2006] IRLR 810 the Court of Appeal upheld the EAT and the Employment Tribunal in its award of 90 days in respect of one group of public sector employees.  However, on a cross-appeal against the employer’s appeal, the trade union affected contended that the EAT was wrong to reduce the award of 20 days for a second group of employees down to 10.

23.	The Court of Appeal accepted that argument, criticising the EAT for interfering with a question of fact.  The issue was: what credit should be given to some form of consultation through various meetings which had been conducted by the employer?  The Court of Appeal acknowledged that either a period of 10 days or 20 days would be appropriate but neither was perverse, and thus restored the decision of the Employment Tribunal.  

24.	Bringing the jurisprudence up to date, in UK Coal Mining Limited v NUM and BACM UK/EAT/0397, Elias J, President, and members held that awards by an Employment Tribunal of the maximum of 90 days were correct.  The Tribunal had found that there was literally no consultation with the recognised trade unions, NUM and BACM, in advance of a proposal to shut Ellington Colliery in Northumberland, with a loss of over 300 jobs.

25.	The employers were duplicitous and deceptive in the reasons which they had given.  The Tribunal awarded 90 days for a deliberate and very serious breach of statutory requirements, albeit it there had been some meetings and some rudimentary form of consultation.  The employers appealed and the EAT decided to apply the following principles as advanced by the trade unions:  
“72.	The unions deny that there was any error by the Tribunal.  The calculation of the award is just and equitable having regard to the default of the employer and its seriousness, as the observations of Peter Gibson LJ in GMB v Susie Radin Limited [2004] ICR 893 para 26, reproduced above, make plain.   Moreover, the fixing of the award is classically a matter for the Tribunal, which the EAT can only question if the Tribunal below has failed to follow the guidelines identified in the Susie Radin case, or misunderstood the evidence, or reached a perverse conclusion: see the observations of Laws LJ in the Court of Appeal in Leicester County Council v Unison [2006] IRLR 810, para. 34. 

73.	They submit that given the findings of the Tribunal, and in particular the conclusion that there was a deliberate attempt to mislead the unions as to the real reason for the dismissals, coupled with the failure to consult save in the most limited way over marginal issues, the Tribunal’s conclusion was perfectly sustainable.  Even if other tribunals might have allowed some marginal reduction for such very limited consultation as there was, the Tribunal was entitled to take the view that this was a very serious and fundamental failure to comply, and that such limited consultation as there was did not in any material way mitigate the seriousness of the conduct.

74.	We agree with that argument.  It seems to us that the employer’s submission rests on the premise that if there has been some consultation, however limited, then the Tribunal is compelled thereby to reduce the compensation below the maximum.  No doubt that is true where such consultation as does take place is more than minimal.  However, the Tribunal clearly felt that that was all that it was here and we do not think that they erred in taking a grave view about the deliberate deception that was perpetrated by the employer in their dealings with the unions.  We accept that strictly there is no obligation to consult over special circumstances as such, but there is a duty to consult over the dates of dismissal, which in practice amounts to much the same thing since it raises the reason why the employers could not delay giving notice of dismissal until the consultations had taken place.  Accordingly, that particular point has no substance.”

26.	With those authorities in mind, we are clear that Ms Sefton’s arguments are correct.  The Tribunal here found that this was a very grave breach and yet it started and ended at what it regarded as the minimum period.  A very grave breach must put the protected award towards the top end. There was no mitigation.  Nobody was there for the Respondent to argue why it had done what it did in breach of its obligations.  No special circumstances were argued, as they were but were rejected in UK Coal Mining.  The Tribunal appears to have linked the consultation period to the protected period but, as we have said, that link was disengaged in 1999.  

27.	Are we entitled to interfere?  Leicestershire v Unison would indicate that we should not. On the other hand, in Susie Radin it was made plain that the guidelines should be followed and in Leicestershire itself, the Court of Appeal was acknowledged that a failure to follow one of those guidelines would be an error of law.

28.	This is not an adjustment of a factual finding by an Employment Tribunal as was the case in Leicestershire, adjusting from 10 to 20 days.  This is a radical overhaul for we hold that the Tribunal should have started at 90 days and worked downwards to pay attention to such mitigation or other circumstances as it would find fair so as to reduce the figure.  As we say, there was none in this case.

29.	Such a dilemma faced the EAT in Amicus v GBS Tooling Limited (in Administration) UK/EAT/0100/05/SM where Burton J, President, with members including Mr Motture, who sits with us today, felt unable to interfere with an award of 70 days.  Yet in TGWU v Morgan Platts (above), the EAT did interfere and lifted the award from 30 to 90 days.

30.	Since we have detected an error of law in the failure to take the correct starting point, as decided by Susie Radin, it is open to us to set aside the decision.  Two options emerge.  Either we make the decision or send it back to the Employment Tribunal.  The only argument put before us is that we should make the decision.

31.	We have, courtesy of this well-reasoned judgment of the Employment Tribunal, all the material necessary for a judgment to be made on this point.  If the Tribunal were to consider this now, in the light of our direction on the law, informed as we are now by UK Coal Mining Limited, there is only one conclusion: 90 days. We are unwilling for further expenditure to be incurred on this case when the result is plain to us.  So we will substitute our judgment as we are asked to do and make an award to the Claimant, setting aside that of the Employment Tribunal and substituting for it the sum of £8,226.  

32.	We would very much like to thank Ms Sefton for presenting her concise arguments in a way which was entirely professional, recognising, as she did, that there was no one to oppose them.