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‘Challenging circumstances’ may come as defence for employers who have failed to comply with requirements of redundancy

Date: (22 May 2013)    |    

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In a EAT judgment in the case of AEI Cables Ltd v GMB the tribunal has provided a useful guidance on how employment tribunals should determine the length of any protective award for breach of an employers’ duty to inform and consult its workforce as enshrined under section 188 of Trade Union and Labour Relations (Consolidation) Act 1992 – TULRCA

The facts of the case is that AEI Cables a copper wiring and cable manufacturer was badly affected by a rise in the price of copper between September 2010 and February 2011 – with increased competition and downward pressure on selling prices it was advised by its accountants to reduce costs urgently or acquire new funding in order to avoid trading while being legally insolvent.

Its bank refused to extend the company’s overdraft facility, the directors considered they had no other choice but to close the cable plant immediately, making all 124 employees employment redundant. Under TULRCA, an employer had a duty to inform and consult with its employees when it proposes to make 20 or more employees redundant within 90 days or less in one of its units. The matter was taken to the tribunal by the employees.

The tribunal in the first instance ruled that there was an utter failure to consult with the trade union or with the employees affected and awarded the 124 former staff the maximum payable under s 189 TULRCA 1992- 90 days of pay.

AEI appealed to EAT stating that the tribunal failed to acknowledge that there had been any circumstances to justify a reduction in the award.

In the Employment Appeal Tribunal the employer argued that the reason for failing to comply with its duties as an employer to inform and consult with its workforce had not been fully considered.

The company’s directors felt that this issue should have been taken into account as mitigating circumstances before deciding on the length of any protective award.

The EAT agreed that the employer could not take the decision for consultation as it was facing challenging circumstances. The key was not ‘what’ the employer had done but ‘why’. And the fact was that had the company continued trading, it would have done so illegally. At that point, it was simply unrealistic to embark on a 90-day consultation.
At the same time, AEI was obliged to comply with its obligations under s188 TURLCA 1992 which could not be disregarded entirely, but the EAT did reduce the level of award to 60 days’ pay for the 124 staff.
The case in itself has not been a groundbreaking one but it demonstrated that the tribunals were willing to taken into account the challenging circumstances that many employers were currently trading in.