USA goes to Europe over workers’ rights
Richard Lissack QC and Mark Mullins represented GMB member Christine Nolan in USA v. Nolan [2010] EWCA Civ 1223 in which the Court of Appeal has decided to make a reference to the European Court of Justice.
The question referred affects workers throughout the European Union: are employers required to consult over the strategic and business decisions underlying redundancy or can they confine consultation to the consequences of these decisions?
Background
Until 2006 Christine Nolan worked with 200 other civilian workers at a US Army base in Southampton called RSA Hythe. Workers at the base repaired and maintained boats and equipment for the US Army in the UK and around the world, including periods on detachment to conflict zones including Afghanistan.
The United States did not consult with the workforce over the decision to close RSA Hythe in 2006 and no explanation for the closure of the base, which the US military’s own assessments rated highly, was ever given. The local MP, Dr Julian Lewis spoke about the closure in the Commons on the 9th May 2006:
There is no strategic reason for its closure or political justification for closing what amounts to 95 percent of the US Army’s footprint in this country. There is no economic justification, as it is a betrayal of the US taxpayer as much as of our ancillary industries, and there is certainly no moral justification for the closure.”
The USA’s appeal
Mrs Nolan won her claim for breach of the duty to consult in the Employment Tribunal. The USA appealed to the Employment Appeal Tribunal where Christine Nolan was represented by Mark Mullins of Outer Temple Chambers.
Workers have rights under Section 188 Trade Union and Labour Relations (Consolidation) Act 1992 and the Collective Redundancies Directive 98/59/EC to be consulted about redundancies of more than 20 people. The EAT decided in UK Coal Mining Ltd v National Union of Mineworkers (Northumberland Area) and another [2008] ICR 163 that there was an obligation to consult about reasons underlying redundancy, overturning a line of earlier case law authority in Middlesbrough Council v Transport and General Workers’ Union [2002] IRLR 332 and Securicor Omega Express Ltd v GMB [2004] IRLR 9.
The USA did not challenge the UK Coal decision in the Employment Appeal Tribunal relying on its argument that though it had not claimed state immunity there was an implied exemption from the consultation obligation for a sovereign foreign power carrying out an act such as the closure of a military base. The EAT rejected this argument.
The USA appealed to the Court of Appeal where Mrs Nolan was represented by Richard Lissack QC and Mark Mullins of Outer Temple Chambers.
The Court of Appeal said it was “not persuaded that there is any substance” in the USA’s original argument for an implied exemption.
However the USA relied on a new argument in the Court of Appeal, directly challenging workers’ rights to consultation as interpreted in UK Coal. It argued that the decision of the European Court of Justice in the later “Fujitsu” case (Akavan Erityisalojen Keskusliitto Alek RY and others v Fujitsu Siemens Computers OY Case C-44/08; [2009] IRLR 944, decided 10 September 2009) was authority that the consultation obligation is not triggered by a proposed business decision to effect the closure of a plant; and that the consultation obligation only arises at the later stage when the business decision has been made and the intention to make the employees redundant has been formed.
After grappling with the Fujitsu decision the Court of Appeal said, diplomatically, that it did not find the interpretation of the ECJ’s decision “straightforward”. In fact it was not easy to decide what questions the ECJ was answering or its answers. The Court of Appeal:
“61….concluded that it can only decide this appeal with the benefit of the further guidance from the ECJ as to the point at which, under the Directive, the consultation obligation arises. Whilst the court appreciates that the ECJ has already provided an answer to that question in Fujitsu, it regrets that it is left with material uncertainty as to what that answer is. The court therefore proposes to order the making of an appropriate reference and would ask counsel to produce a draft reference for its consideration.”
The Court went on to say:
“62. The court has of course had careful regard to the USA’s express unwillingness for any such reference to be made; and it recognises that it is not the court of last resort and so is not obliged to make a reference. The court is, however, also sensitive to the consideration that the issue upon which it requires guidance is important not just to the disposition of this litigation but also to industrial practice generally: employers need to understand the nature of their consultation obligations. If the court were to venture a view on the true interpretation of Fujitsu and decide the question of principle accordingly, its decision would be binding unless and until the Supreme Court were to hold otherwise in this or another case; and there can be no certainty that its decision in this case, whichever way it went, would be taken to the Supreme Court. In short, the court regards the point as too important for it to risk adopting the wrong interpretation of the decision in Fujitsu.”
Implications
It is unfortunate that the ECJ expressed itself so unclearly in Fujitsu that the Court of Appeal was unable to decide this appeal. The period of (relative) certainty over redundancy consultation in the UK that followed the decision in UK Coal is now over until this reference is decided, which will take a year at least.
There has been little, if any, evidence since the EAT decided UK Coal in late 2007 that the obligation to consult on business decisions underlying redundancy causes employers difficulty. Such consultation was widely considered to be no more than good industrial relations practice even before the decision in UK Coal. Questions do remain over the exact point at which the consultation obligation is triggered, the information that has to be shared with workers representatives and the extent to which domestic law properly implements the Collective Redundancies Directive 98/59/EC. Whether the reference in USA v. Nolan will clarify all these questions remains to be seen.
As a matter of practical advice, the safest course is for employers is to continue to consult in line with UK Coal on the reasons underlying redundancy including reasons for closure of a workplace. Workers’ representatives should continue to expect and press for full consultation. If necessary, employers may rely on the “special circumstances” defence in s.188(7) TULR(C)A 1992, as the Court of Appeal has suggested the USA might have done in this case.
Legal advisers and HR professionals will want to keep in mind that the extent of the consultation obligation has not been finally decided and that there may be a defence to a failure to consult Tribunal claim which concerns strategic or business decisions underlying collective redundancy.
The final point of interest in the case is the involvement of the USA, despite its “express unwillingness”, in a reference to the European Court of Justice. The outcome of the reference will potentially affect the rights of workers across the whole European Union. This is the first case in which a foreign state has been in such a position. The arguments of the USA , if pursued before and accepted by the ECJ, will define and restrict the scope of workers’ rights to collective consultation on redundancy across Europe, though these rights have no direct equivalent in US employment law.
Strictly, the USA is not a party in the reference proceedings, which are formally described as non contentious. The USA is not obliged to make observations to the ECJ nor to appear at any oral hearing held by the ECJ. Nonetheless it is striking that the USA launched its appeal with an argument based on the sovereign rights of states and has ended up in a position which some will see as unwelcome meddling in the rights and obligations of European workers and employers.
