US Government Defeated in Collective Redundancies Test Case

All employers have a duty to consult staff representatives before making collective redundancies – and a landmark Supreme Court decision has established that that applies even to foreign governments who operate bases on British soil.

The United States of America (USA) took a strategic decision to close a water craft repair centre on the Hampshire coast. Those who worked at the centre lost their jobs without being given any say in the matter. One of them launched Employment Tribunal (ET) proceedings on the basis that worker representatives had not been consulted prior to the collective redundancies, as required by the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).

The USA did not rely on state immunity in order to defeat the claim, although it was common ground that it could have done so. In the event, the ET upheld the woman’s claim and she was awarded one month’s pay. That decision was subsequently upheld by the Employment Appeal Tribunal. The Court of Appeal sought clarification from the Court of Justice of the European Union (CJEU) as to precisely when the duty to consult is triggered . However, whilst TULRCA does not exclude workers employed by public administrative bodies or by establishments governed by public law, the EU Collective Redundancies Directive expressly provides for them to be excluded from its scope. The Court therefore declined to rule on the matter as it did not have jurisdiction to do so. 

In pursuing its case, the USA argued that TULRCA should be interpreted in such a way as to accord due respect to its authority as a foreign state to make strategic decisions which are non-commercial in nature. The decision to close the centre had been taken at a very high level in Washington and the interpretation thus far favoured did not accord with principles of international law.

However, the Supreme Court found that the wording of the legislation was clear and that there was no reason to read into it a tailored exemption for a foreign power operating a base within the UK. Arguments that the UK had breached international law by seeking to exercise legislative power outside its own territory were also rejected.

The USA’s argument that the outcome of the case represented discrimination on grounds of nationality, in breach of EU law, also fell on fallow ground. The Court gave the example of the freedom of British universities to charge unrestricted tuition fees to non-EU citizens.

Workers at the centre were not represented by a trade union. However, by virtue of TULRCA, as subsequently amended in order to conform with EU law, claims for compensation were not restricted to circumstances where employees enjoyed union representation recognised by their employer. The USA’s arguments that such extended protection fell outside the powers conferred by section 2 of the European Communities Act 1972 were also rejected by a majority.

The case will now return to the Court of Appeal for consideration of whether the USA complied with its redundancy consultation obligations under TULRCA.

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