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Compensation for failing to consult fully should not be based on statutory maximum, says UK EAT

The statutory maximum should only be used as a basis for calculating compensation for a failure to consult under the collective redundancy rules when there has been no consultation at all, the UK's Employment Appeal Tribunal (EAT) has said.

In a recent judgment, the EAT said that the employment tribunal had made a mistake when it took the maximum compensation available under the law and worked down when calculating the compensation due. The employer, Barnet Borough Council, had carried out some consultation but admitted a breach of its obligations in relation to agency workers.

"We are not able to accept the submission ... that what the tribunal was doing was simply identifying a scale and saying that it would start its consideration by looking at the maximum that it could award in law," the EAT said.

"We accept the central submission ... that the tribunal was having difficulty in understanding how it should approach the question of a protective award ... Accordingly, the conclusion to which we have come is that the tribunal did fall into error as a matter of law in its approach to the question of a protective award or equivalent compensation under the TUPE Regulations," it said.

The case will now return to the same employment tribunal, which will reconsider the amount of compensation that should be awarded based on its familiarity with the evidence, the EAT said.

Collective redundancies are those where an employer proposes making 20 or more employees redundant within a 90-day period. Employers must consult on their proposals for collective redundancies with unions or representatives of the affected employees for at least 30 days, or 45 days where more than 100 employees are affected, before they can make any redundancies.

Barnet Borough Council, a local authority, was planning to make some staff redundancies and also outsource some of its employees to third parties. The latter group of employees were protected under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations, which protect the rights of employees when their employer changes or the work that they carry out is outsourced, brought back in house or the service provider is changed. Last year, the employment tribunal found that it had breached consultation and information requirements under both the collective redundancy and TUPE rules, as it had omitted some information about its use of agency workers.

Under existing case law, the purpose of a tribunal award in this context is to penalise an employer for breaking the rules rather than compensate employees. It provides that tribunals should start with the maximum award and reduce it only if there were mitigating circumstances in cases where there has been no consultation at all. However, this rule is not supposed to be "applied mechanically" in cases where there has been some information has been provided to employees or some consultation has been carried out.

In its ruling, the EAT focussed on a paragraph in the employment tribunal's judgment where it stated that it had to consider "what is just and equitable ... [starting] with a maximum only where there is no consultation and that cannot be said to be the position in this case". However, it went on to say that it was "not quite sure where we should start if we do not start with the maximum and work down ... given that in our view this is a relatively serious failure we do indeed start with the maximum".

Finding that the tribunal had "erred in law", the EAT said that it did not "consider that these passages can simply be regarded as an infelicity of language".

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