AEI Cables Ltd v GMB & Ors (Redundancy : Protective award)

A protective award under section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992 is a sanction for breach of collective redundancy consultation duties, not compensation for employees’ loss. The tribunal should focus on the seriousness of the employer’s default. Although the maximum period is the appropriate starting point where there has been no consultation, it must take account of mitigating circumstances and ask why the employer acted as it did.

It is not reasonable to expect an employer to continue trading while insolvent merely to enable consultation. Insolvency may materially reduce the period of an otherwise substantial protective award, while not excusing a failure to take all practicable steps to provide information and consult before dismissal.

The employer manufactured copper wiring and cable. Following financial difficulty and the bank’s refusal to extend its overdraft, its directors were advised that continued trading risked insolvency. On 25 May 2011 they decided to close the cable plant, and 124 employees were summarily dismissed for redundancy on 27 May.

The Employment Tribunal at Newcastle-upon-Tyne found a complete failure to comply with the collective consultation and information duties under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. It rejected a special-circumstances defence and made a 90-day protective award. Those findings were not appealed. The employer appealed only the length of the award, contending that the Tribunal had failed to account for insolvency and the very limited period during which lawful trading could continue.

1. Appeal allowed. The 90-day protective award was reduced to 60 days.

2. A protective award is penal rather than compensatory. Its purpose is to encourage compliance with sections 188 and 189 of the Trade Union and Labour Relations (Consolidation) Act 1992. The tribunal has a wide discretion, but must focus on the seriousness of the employer’s default. The maximum award is the starting point where there has been a complete failure to consult, subject to mitigating circumstances: Susie Radin v GMB, [2004] ICR 893.

3. The Employment Tribunal was entitled to find that the employer had made no meaningful consultation and had provided no real information. It should nevertheless have considered why the dismissals occurred when they did. Following advice on 25 May 2011, the employer could not lawfully continue trading for a 90-day consultation period without risking trading while insolvent.

4. Insolvency did not erase the seriousness of the breach. A responsible employer facing a short available period should take all practicable steps to consult and provide information. Some consultation could have occurred between the trigger date and the dismissals. However, the Tribunal’s assumption that a 90-day consultation period was possible was flawed. Balancing the complete failure to comply against the insolvency constraints, the EAT substituted a 60-day protected period by agreement rather than remitting the assessment.

• Employment Appeal Tribunal: allowed the employer’s appeal against the length of the protective award and substituted an award of 60 days.
• Employment Tribunal at Newcastle-upon-Tyne: decision sent to the parties on 18 April 2012. It found a breach of section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 and made a 90-day protective award. The breach and rejection of special circumstances were not challenged on appeal.