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Media Briefing Note: ECJ Rules on Redundancy Consultation

22 March 2012

LONDON, 22 March 2012 – Today the European Court of Justice (ECJ) has given a preliminary view on a request from the Court of Appeal to clarify the terms of the EU Directive that requires an employer to consult with its  workforce 'in good time' when contemplating collective redundancies.

In the Advocate General Opinion, released today (22 March 2012), on the United States of America v Nolan case it was confirmed that the obligation to begin consultations only arises once a “strategic or commercial decision” which compels the employer to plan for collective redundancies has been taken. However, the Advocate General suggested that it is the responsibility of the national court (in this case the Court of Appeal) to decide when such a strategic decision has been taken and whether consultation began in good time following that decision.

Hogan Lovells' employment partner Christopher Wellham said:

”If this opinion is followed when the European Court of Justice gives its final decision, it seems likely that employers will have more flexibility in the future about when they start redundancy consultations than had previously been thought. In particular, the opinion seems to imply that an employer does not need to consult staff before a decision to close a business is taken, as long as consultation starts “in good time” once the employer’s decision has been made.”

Background to case

In November 2010 the EU Court of Appeal asked the ECJ to rule on whether employers need to consult with their staff before deciding to make them redundant. This followed an appeal by the U.S. Government over the closure of a U.S. army base in Southampton, Hampshire, in 2006, which resulted in the loss of 200 civilian jobs.
The civilian workforce were only informed of the closure on 24 April 2006 and, on 5 June 2006, a collective consultation was commenced. A UK employment tribunal held that the U.S. Government had failed to engage in any meaningful consultation and made a protective award in favour of the affected employees.

The tribunal awarded former army base employee Christine Nolan 30 days pay or £3,000 over the U.S. Government’s failure to consult. The remaining staff were also awarded between £2,000 and £4,000, bringing the total compensation package to about £600,000.

Subsequently, the U.S. Government went to the Court of Appeal, basing its appeal on an ECJ ruling in September 2009 in the case of Akavan Erityisalojen Keskusliitto Alek RY V Fujitsu Siemens Computers OY. It claims that the ruling indicated that an obligation to consult was not triggered by a proposed business decision to close a plant. The obligation only came into force after the business decision had been made and the intention of making redundancies was there.
The appeals court then referred the case on to the ECJ.


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