The Supreme Court has today released its judgment in the case of USA v Nolan. This case will be of interest to employers as it considers how early collective consultations should occur. However, this judgment only deals with some discrete preliminary issues arising from the fact that the case concerned the closure of a USA military base in British territory, including state immunity and the jurisdiction of the English courts over proposals or decisions about domestic redundancies developed or taken abroad.
The Supreme Court held that the USA was subject to the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA); although it would have been open to the USA to invoke state immunity, it had failed to do so in time.
The good news is that we are now a step closer to a decision on the more relevant issue as the Court of Appeal can now consider the point which will be of most concern to employers, i.e. at which point the duty to consult collectively arises. The Court has been asked to decide whether the duty arises:
(i) when the employer is proposing, but has not yet made, a strategic business or operational decision that will foreseeably or inevitably lead to collective redundancies; or
(ii) only when that decision has actually been made and he is then proposing consequential redundancies?
This question arises out of a tension between the wording of the European Collective Redundancies Directive and the wording used in TULRCA. The Directive requires consultation when the employer is contemplating collective redundancies whereas TULRCA provides that the obligation to consult arises where the employer is proposing to dismiss.
With protective awards of up to 90 days’ pay per employee and with no cap on the level of a week’s pay for failing to commence consultation when the duty arises, the cost of a failure to consult on time can be significant. As such, clarity as to when this duty arises will be eagerly awaited.
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