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Shanahan Engineering Ltd. v UNITE Union

25 Apr 10 Shanahan appealed against an Employment Tribunal's finding that it had been in breach of its duty to consult with trade union representatives over redundancies caused by changes to its contract with Alstom

Appeal No. UKEAT/0411/09/DM, Shanahan appealed against an Employment Tribunal's finding that it had been in breach of its duty to consult with trade union representatives over redundancies caused by changes to its contract with Alstom.

EMPLOYER MUST CONSULT OVER REDUNDANCIES FORCED BY CANCELLED CONTRACT

An Employment Tribunal had held that the appellant, Shanahan Engineering, had been in breach of its duty to consult trade union representatives under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 when it proposed to make more than 20 employees redundant.

Shanahan pleaded that the tribunal had failed to take into account special circumstances which had made it not reasonably practicable to comply with the Act. The tribunal had also ordered Shanahan to remunerate the employees it had dismissed by way of a protected award. The protected period was 90 days, whilst the employees had only been paid a week’s salary in lieu of notice. Again Shanahan pleaded that, even if it were in breach of its duty, the tribunal had failed to take into account mitigating circumstances.

Shanahan had won a contract for work on a power station which was being built by Alstom near Plymouth. Shanahan was being paid the costs of labour plus a fee. By April 2008, it was employing 145 craft employees on site.

There were problems of congestion and ground conditions on the site which resulted in several days being lost. Alstom had asked Shanahan to put forward proposals to eliminate these. Shanahan suggested that instead of building the generators simultanaeously, they would be built one after the other, which would reduce the safety risks, but would inevitably lengthen the completion time. Alstom accepted this, and issued Shanahan with a written instruction, asking it to review resources on site and optimise them in line with the new schedule. This led to Shanahan making 50 staff redundant.

Section 188 of the Act requires an employer to consult with the union representative over any proposed redundancies, although section 188(7) provides:

“(7) If in any case there are special circumstances which render it not reasonably practicable for the employer to comply with a requirement of subsection (1A), (2) or (4), the employer shall take all such steps towards compliance with that requirement as are reasonably practicable in those circumstances.”

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Section 188(7) also makes provision for cases where the decision leading to the proposed dismissal is that of a “person controlling the employer (directly or indirectly)”. A failure by that person to provide information to the employer will not constitute special circumstances for the purposes of section 188(7). Neither party relied on that provision in this case because, although Alstom controlled the contract and the work, Alstom did not control Shanahan.

The court dismissed Shanahan’s appeal.

The instructions given by Alstom made it inevitable that the workforce on the contract would have to be reduced; but it had been for Shanahan to decide whether employees should be dismissed for redundancy, how many employees should be dismissed, when they should be dismissed, and what if anything ought to be done to mitigate the consequences of dismissal. These had been proper matters for consultation. The purpose of the legislation was that there should be consultation with a view to agreement if possible on these issues. It was difficult to see how, in these circumstances, the instruction from Alstom could be read as an instruction immediately to dismiss regardless of a duty to consult.

Turning to the issue of the protected period, Alstom’s unexpected direction to cease work had at least been a potentially mitigating important circumstance. . In the ordinary case where there has been no consultation at all there will have been “good time” to consult; and the failure of the employer to do so will have extended over a substantial period. That was not the position here.

The purpose of the protected award was to provide a sanction for a breach of an employer’s obligations under section 188; it was not to compensate employees; and that the focus should be on the seriousness of the employer’s default. There was, therefore, no connection between the 90 day maximum award and the length of time consultation would have taken. The Tribunal should take into account all the circumstances and make such award as is just and equitable, and the award would be remitted to them for reconsideration. (Shanahan Engineering Ltd. v UNITE Union, 22 February 2010.)

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