THE INDUSTRIAL TRIBUNALS

CASE REF:	797/05

CLAIMANT:			Amicus		

RESPONDENT:		Irlandus Circuits Limited		

DECISION

The unanimous decision of the tribunal is that the respondent failed to comply with its duty to consult under Article 216 of the Employment Rights (Northern Ireland) Order 1996 and the members of the claimant union are entitled to a protective award of 90 days from the date of dismissal.

Constitution of Tribunal:

Chairman:		Mr Wimpress

Members:		Mr Dunlop
			Mr McCusker

Appearances:

The claimant was represented by Mr J O’Neill, solicitor of Thompson McClure, Solicitors

The respondent did not appear and was not represented.	

1.	The claimant brought a claim dated 17 May 2005 seeking a declaration that the respondent had failed to comply with its duties under Article 216 of the Employment Rights (Northern Ireland) Order 1996 and a protective award in respect of the dismissal of each of its members by the respondent.

2.	The respondent at the date of its response was the subject of a Voluntary Arrangement supervised by Grant Thornton and under the control of the High Court. 

3.	A default judgment was entered against the respondent on 25 July 2005 due to its failure to enter a response.  On 13 September 2005 the default judgment was revoked following a review hearing on 8 September 2005.  Subsequently the claim was listed for hearing on 25 April 2006.

4.	On 20 April 2006 the respondent’s solicitors, Messrs Elliott Duffy Garrett, sent a letter by facsimile to the tribunal office advising that the respondent did not intend to appear or be represented at the hearing.  The letter went on to state that the respondent would wish the tribunal to consider its defence as set out in the response form dated 2 July 2005 together with written submissions which were attached to the letter. The tribunal determined to proceed with the hearing on this basis.

5.	The Tribunal received a bundle of documents from the claimant together with a written submission by the claimant’s solicitor and also heard oral evidence from the senior shop steward in the respondent company, Mr Byrne.

6.	The claim submitted by the claimant union stated that the respondent’s entire workforce of around 40 persons including around 30 members of Amicus was made redundant on or about 4 March 2005.  No HR1 form was issued notifying the union of the respondent’s intention to make employees redundant. 

7.	It is accepted by the respondent that the claimant is a recognised trade union and “appropriate representatives” within the meaning of Article 216 of the 1996 Order.  It is also accepted by the respondent that it dismissed more than 20 employees at the same establishment on grounds of redundancy on 4 March 2005.

8.	The employer’s duty to consult representatives of employees about proposed redundancies is set out at Article 216 of the 1996 Order the material portions of which are as follows:

“(1)  	 Where an employer is proposing to dismiss as redundant 20 or more
employees at one 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 may be affected by measures taken in connection with those dismissals;

  (2)  	 The consultation shall begin in good time and in any event—
 
 (a)	where the employer is proposing to dismiss 100 or more employees
 	as mentioned in paragraph (1), at least 90 days, and
 
 (b)   	otherwise, at least 30 days, 

before the first of the dismissals takes effect. 

  (3)      For the purposes of this Article the appropriate representatives of any
 	  affected employees are— 
(a)	if the employees are of a description in respect of which an independent trade union is recognised by their employer, representatives of the trade union, or……
  (4)   	The consultation shall include consultation about ways of— 
(a)   	avoiding the dismissals, 
(b)   	reducing the numbers of employees to be dismissed, and 
(c)  	mitigating the consequences of the dismissals, and shall be undertaken by the employer with a view to reaching agreement with the appropriate representatives.
 
  (6)     For the purposes of the consultation the employer shall disclose in writing to
the appropriate representatives— 

(a)   the reasons for his proposals,
 
(b)   the numbers and descriptions of employees whom it is proposed to
       dismiss as redundant, 

(c)   the total number of employees of any such description employed by the
       employer at the establishment in question, 

(d)   the proposed method of selecting the employees who may be
       dismissed,
 
(e)   the proposed method of carrying out the dismissals, with due regard to
       any agreed procedure, including the period over which the dismissals
       are to take effect,

(f)   the proposed method of calculating the amount of any redundancy
      payments to be made (otherwise than in compliance with an obligation
      imposed by or by virtue of any statutory provision) to employees who
      may be dismissed. 

(7)   	That information shall be given to each of the appropriate representatives by
being delivered to them, or sent by post to an address notified by them to the employer, or (in the case of representatives of a trade union) sent by post to the union at the address of its head or main office. 

(9)   	If in any case there are special circumstances which render it not reasonably
practicable for the employer to comply with a requirement of paragraph (2),
(4) or (6), the employer shall take all such steps towards compliance with
that requirement as are reasonably practicable in those circumstances.”

Article 217(6) makes provision as to how a tribunal should approach the Article
216(9) issue in the following terms:

“(6)  	 If on a complaint under this Article a question arises— 

(a)   whether there were special circumstances which rendered it not
reasonably practicable for the employer to comply with any requirement of Article 216, or
 
(b)   whether he took all such steps towards compliance with that
       requirement as were reasonably practicable in those circumstances,
       it is for the employer to show that there were and that he did. “

9.	As indicated in Article 216(2), the consultation must start in good time and in any event within 30 days of the first dismissals taking effect where the employer proposes to dismiss more than 20 but less than 100 employees as was the case here.  The consultation must contain all of the elements set out in Article 216(4) unless there are special circumstances within the meaning of Article 216(9).  Article 216(6) provides that information about redundancies must be provided to the appropriate representatives in writing.  The respondent accepted that no such disclosure was provided in its replies to the claimant’s Notice for Further and Better Particulars and in its Statement of Evidence.

10.	In Susie Radin Ltd, Neutral citation no: [2004] EWCA Civ 180, Peter Gibson LJ identified the nature of the consultation exercise in the equivalent English provisions at paragraph 24 of his judgment as follows:

“(1)	An absolute obligation is imposed on the employer to consult the appropriate
representatives of employees who may be affected by the proposed dismissals, such consultation to be in good time and to be conducted with representatives who are fully informed by reason of the required disclosure specified in s. 188 (4). Moreover, because the disclosure must be in writing, there can be no dispute as to the extent of the disclosure in fact made.

 (2)	The topics for the consultation must include the matters specified in s. 188
(2) and the employer must undertake the consultation not as an end in itself but with a view actually to reach agreement.”

11.	It is clear from Mr Byrne’s unchallenged evidence that there was absolutely no discussion about avoiding dismissals or reducing the number of employees to be dismissed.  There is little or no evidence of any consultation on mitigating the consequences of dismissals either.  The material submitted by the respondent indicates that the consultation extended no further than a last minute meeting with staff and trade union officials on 21 February 2005 in which the respondent’s financial difficulties were explained.  The respondent did no more than advise that the business was closing down and that the bank was funding an orderly wind-down of the respondent’s operations by paying the employees’ wages for the following two weeks.  This amounts to no more than informing staff of a fait accompli and is not capable of amounting to consultation within the meaning of Article 216(4).  It is also clear that the respondent failed to provide the written information required by Article 216(6).

12.	The obligation to consult in accordance with the requirements of Article 216 (2), (4) and (6) is not absolute and an employer may be able to demonstrate that there are special circumstances which render it not reasonably practicable to comply with any of these requirements.  However, Article 216(9) still obliges the employer to take all such steps towards compliance with that requirement as are reasonably practicable in those circumstances.  In the present case, the respondent has sought to rely on “special circumstances” in both its response and statement of evidence and it is therefore necessary to examine whether this contention is made out bearing in mind that Article 217(6) places the onus on the employer to prove “special circumstances”.

13.	The respondent’s case in relation to “special circumstances” was first set out in paragraph 6.2 of its response as follows:

“The respondent would contend that the entirely sudden circumstances which arose in late February 2005 were unpredictable and lead to the necessity to have the respondent enter into a Voluntary Arrangement with its creditors.

As part of the steps required to safeguard the future of the company, its creditors and its employees it was necessary to take drastic steps including the dismissal of a number of employees.  It is contended that this action amounts to special circumstances which made it impractical to comply with the statutory consultation requirement of Article 216…..

•	as a result of sales growth in the last quarter of 2004, the respondent’s need to secure additional working capital had became acute;

•	in December 2004, the pressure on existing working capital resulted in the first real signs of material shortages;

•	in January 2005 the respondent’s trading position deteriorated markedly;

•	as a result, available working capital through invoice discounting  - the respondent had no overdraft facility – was placed under even greater pressure;

•	in addition, a major customer – citing quality issues which the company did not accept – refused to pay;

•	consequently a substantial shortfall appeared in the Company’s cash-flow in the first two weeks of February 2005;

•	on 18 February 2005, the respondent’s bankers advised that they would not extend funding to meet the cash-flow shortfall;

•	on that date, the directors sought professional advice from Grant Thornton UK LLP, as by that stage the company was insolvent – it could not meet the liabilities as they fell due;

•	the advice was that, as the respondent was insolvent, it could not continue trading without its directors incurring legal liabilities for wrongful trading;

•	in the light of this advice the directors agreed that the best option available was to propose a CVA in order to maximise funds available to creditors.”
  
This contention is also summarised in the Statement of Evidence submitted on behalf of the respondent.

14.	The authors of Harvey draw attention to and comment on the relevant case law on
	this subject.  It is clear that insolvency has frequently been prayed as a special circumstance but it is not to be regarded as a special circumstance per se.

“…if the employer goes into liquidation it is not enough to say that insolvency is a category of special circumstances, the employer has to show that, in the particular instance, insolvency made it impossible to consult fully.” [Harvey E 2605]

In Clarke of Hove Ltd v Bakers’ Union (1979) where a company’s situation became steadily worse until the directors had no alternative but to cease trading, the tribunal found that there were no special circumstances and its decision was affirmed by the Court of Appeal.  Harvey comments on this decision at 2608 as follows:

“If insolvency is a sudden disaster, then it may constitute special circumstances; but if there is a general rundown then it is open to the tribunal to find the circumstances are not special.”

15.	We have given careful consideration to the contention that this was a case of special circumstances as set out in paragraph 6.2 of the respondent’s response.  We are not persuaded however that these matters amount to special circumstances.  In particular we have taken account of the fact that the first warning signs of financial difficulty appeared in late 2004 and that further difficulties were encountered in January and February 2005 and that matters came to a head on 18 February 2005.  It does not therefore bear the hallmark of a sudden disaster.  We do not say that the contentions advanced by the respondent are not capable of amounting to special circumstances and had the respondent appeared at the hearing and given us the benefit of detailed oral evidence and submissions it is possible that we might have been persuaded that there were special circumstances but given that the onus in on the respondent to prove same, we could not be satisfied on the basis of an unsubstantiated written case that they did exist.

16.	Even if we were satisfied that there were special circumstances, Article 216(9) still requires the employer to take all such steps towards compliance with a requirement of paragraph (2), (4) or (6), as are reasonably practicable.  The respondent’s contentions  in this regard are also set out in its response and are as follows:

“The respondent…..took the following steps to inform and consult with the Claimant:

•	On 21 February 2005, the directors of the respondent convened a meeting of all employees to advise that it was insolvent as a result of its bankers’ refusal to extend funding to meet the cash-flow shortfall;

•	The directors further advised the employees that the respondent’s bankers had agreed to provide limited support for the two weeks beginning on 21 February 2005 in order to wind down its operations in an orderly fashion, and that wages would be paid as normal during that period.

Immediately prior to this meeting, Grant Thornton UK LLP, who were in attendance at the respondent’s plant, met with the Amicus shop steward to advise him of the above.

After the directors had addressed the employees as detailed above, Grant Thornton UK LLP briefly advised the employees of the relevant provisions of the Employment Rights (NI) Order 1996 in relation to meeting entitlement for arrears of pay, holiday pay, pay in lieu of notice and redundancy.

The respondent’s replies to particulars are couched in similar terms save that the shop steward is identified as Mr Byrne. It was contended that the insolvency of the company was fully explained to him and that the process for the closure of the business and termination of all employment was fully discussed.

This matter was also touched on briefly in paragraph 3 of the respondent’s Statement of Evidence in the following terms:

“On 21 February 2005, it was resolved that the company would cease trading by 4 March 2005 and would subsequently propose a company voluntary arrangement to its creditors.  This required to be announced forthwith with the loss of all jobs.  It was announced on the afternoon of 21st February 2005.  The Applicant’s trade union representatives were informed of the pending announcement in advance of the meeting though it is accepted that the information was only provided a short time before the meeting took place.”

17.		Even accepting this at face value, it is clear that the steps taken by the respondent came nowhere near meeting its obligations under Article 216(9).  There was no process of consultation whatsoever.  It was simply a case of the respondent informing the staff and the trade union representative of what had occurred and its consequences.  Even this limited information was provided at the last minute rather than in good time and was therefore incapable of fulfilling the objectives of Article 216(4) namely avoiding the dismissals, reducing the numbers of employees to be dismissed, and mitigating the consequences of the dismissals.  Nor was there any prospect at this stage of reaching agreement with the appropriate representatives because as noted earlier it was a fait accompli.  It is also material to note that no such action was taken between the announcement on 21 February 2005 and the closure of the business on 4 March 2005.  Moreover Mr Byrne gave evidence which we accept that far from seeking to mitigate the consequences of dismissal, the respondent prevented Jobs Centre staff attending on site to provide advice to staff.  This reinforces our view that this whole exercise was aimed at protecting the employer from legal and financial liability rather than doing anything for the benefit of employees.  The two weeks’ pay guaranteed to staff by the respondent’s bankers appears to have been undertaken to enable existing orders to be fulfilled with the payment to the employees being largely incidental.

18. 	The consequences of failing to comply with a requirement of Article 216 are set out in Article 217 which provides, insofar as material,  as follows:

“217 (2)   If the tribunal finds the complaint well-founded it shall make a
     declaration to that effect and may also make a protective award.
 
        (3)    A protective award is an award in respect of one or more
                descriptions of employees— 

(a)   who have been dismissed as redundant, or whom it is proposed to
     dismiss as redundant, and

(b)   in respect of whose dismissal or proposed dismissal the employer
    has failed to comply with a requirement of Article 216, 
 
  ordering the employer to pay remuneration for the protected period. 

        (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 Article 216;
  
  but shall not exceed 90 days.”

19.  	In view of our findings as set out above, we are entirely satisfied that the claimant is
entitled to a declaration that the respondent failed to comply with its duty to consult under Article 216 of the Employment Rights (Northern Ireland) Order 1996.  The next issue is whether we should exercise our discretion to make a protective award and if so for how many days.

20.	The purpose of a protective award has been authoritatively addressed in the Susie
Radin Ltd case in the following terms:

“I suggest that ETs, 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 s. 188: it is not to compensate the
employees for loss which they have suffered in consequence of the
breach.

(2)	The ET 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 the
availability to the employer of legal advice about his obligations under
s. 188.

(5) 	How the ET assesses the length of the protected period is a matter for
the ET, 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 an extent
which the ET consider appropriate.”

It is therefore clear that the award is punitive rather than compensatory and that the proper approach in a case such as the present where there was no consultation is to start with the maximum award of 90 days and only reduce it if mitigating circumstances justify so doing.  While the respondent points to alleged unusual circumstances in this regard, its approach on this issue as set out in its response betrays a fundamental misunderstanding of the purpose of a protective award.  In essence the remainder of the respondent’s case on this issue is that the breach did not result in any financial loss given that all the employees lost their employment and that consultation was pointless in that there was no basis upon which their employment could have been saved.

21.	It is also instructive to consider the application of the principles set out in the Susie Radin Ltd case by the Employment Appeal Tribunal in Amicus v GBS Tooling Ltd [2005] IRLR 683.  At paragraph 20 of their decision the Employment Appeal Tribunal stated:

“The EAT has said that, in assessing the seriousness of the employer’s breach – even in a case of total failure to consult- the employment tribunal may properly take account of the nature of the breach, the consequences of the breach and the state of mind lying behind the breach.”

In that case the employer had failed to comply with the statutory consultation requirements but had kept the union informed about the deteriorating situation and had made it clear that redundancies were likely.  The award in that case was on this basis limited to 70 days.

22.	In the present case there is no evidence of any attempt to comply with the statutory requirements and there is no basis for suggesting that the breach was merely technical.  Furthermore Mr Byrne’s evidence was that the respondent had consulted in relation to previous rounds of redundancies and was therefore well aware of the process.

23.	In all of these circumstances, the tribunal is satisfied that a protective award should
be made for a period of 90 days beginning with the date of the first dismissals and
that each member of the union engaged by the respondent is entitled to be paid 
under the protective award.

	

Chairman:

Date and place of hearing:	25 April 2006, Belfast.	

Date decision recorded in register and issued to parties: