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Redundancy talks should have included fixed term contracts: Supreme Court

29 April 2015

The duty to consult employee representatives on redundancy plans involving 20 or more employees includes workers on limited term contracts whose contract terms expire during the prescribed consultation period, the UK Supreme Court ruled today.

Five judges unanimously allowed an appeal by the University & College Union against a decision of the Court of Session, which had affirmed an Employment Appeal Tribunal decision in favour of the University of Stirling, after an employment tribunal had held in test cases that employees had been dismissed as redundant for the purpose of the consultation requirement.

After incurring a budget deficit in 2009-10 the university proposed to make up to 140 permanent staff redundant, and undertook collective consultation with the relevant unions in terms of s 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992. It did not consider that it needed to include in the process employees who were employed under limited term contracts (“LTCs”) which came to an end during the consultation period. The appellant union considered that employees on LTCs should have been included on the grounds that they had been dismissed as redundant in terms of s 188(1).

Both the appeal tribunal and the Inner House held that the employees concerned had been dismissed but that they had not been dismissed as redundant, on the basis that the fact that each employee in question had agreed to enter an LTC was a reason related to the employee, which took the dismissal outwith the redundancy provisions.

Lady Hale, with whom Lords Wilson, Sumption, Reed and Hughes agreed, said the issue depended on two questions: whether the expiry and non-renewal of an LTC amounted to a dismissal for this purpose, as to which it was common ground between the parties that it did; and whether such a dismissal was “for a reason not related to the individual concerned” – the definition of dismissal as redundant in s 195(1) of the Act.

She reasoned that the Inner House's approach could not be right, for two reasons: if Parliament had intended to exclude all LTCs, it would have said so; and in excluding most LTCs in later legislation, Parlliament had accepted that without that exclusion, at least some LTCs would fall within the scope of the duty.

It was important to bear in mind that Parliament had intended to add to the classic redundancy situation of a cessation or reduction of business, reorganisations where employees were dismissed and offered new contracts on different terms. If the terms and conditions of employees’ employment contracts were “reasons related to the individual concerned”, such business rearrangements would not be covered.

She added that the context and content of the duty to consult suggested that it was concerned with the needs of the business as a whole. The employer had to explain why they wished to make employees redundant, which descriptions of employee were affected, and how the employees would be chosen. Employees on LTCs might be a description of employees for this purpose, and being on an LTC might be a criterion for selecting for dismissal, but it was a collective description rather than a reason relating to the individual concerned.

Where an LTC came to an end, the “dismissal” was the failure to offer the employee a new contract. The fact that it was an LTC, or even that the employee agreed to it, could not by itself be a reason for the non-renewal. A reason related to the individual if it was something to do with him or something he had done. It was to be distinguished from a reason relating to the employer, such as the need to effect change in the business. The coming to an end of an LTC was a reason related to the employer’s business, not to the individual.

The case was remitted to the employment tribunal for consideration of further issues.

Click here to view the judgment.

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