Keeping Kids Company (In compulsory liquidation) v Smith & Ors
Good morning and welcome back to your weekly case law update. Those of you who missed it, last week we had our employment law update for February with features on the gig economy, forthcoming legislation and sex discrimination.
This week, it has been snowing a lot! Lincolnshire, where PJH Law is based, has been particularly badly hit with 6-8 inches of snow, water and heating failures and road closures around reported county and nationwide. This is the perfect time remind people of our standard snow advice. At PJH Law staff have put this advice into practice and have taken phones and computers home to ensure services can still be provided even if staff are snowed in, although a snowman has also been built!
Snowy weather aside, our case this week concerns collective redundancy far more exciting I know. This area of employment law is governed by the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). The Act outlines the obligation to inform and consult on any collective redundancy scenario – 20 or more employees. A failure to consult could result in the employer being liable for a 90 days gross pay protective award for each employee effected. There are some special circumstance which negate the need to consult.
The question this week is:
Does a withdrawal of funding amount to a special circumstance that omits the need to collectively consult?
This Respondent in this case is Keeping Kids Company, which is a charitable organisation that provided support for deprived children in urban areas. The Respondent’s chairmen was Alan Yentob, the former Creative Director of the BBC who resigned due to his involvement in the collapse of the charity and attempts to control the reporting of it.
In June 2015, the charity had severe financial difficulties and applied for an emergency £3m grant from the government and announced a re-structuring that which Mr Yentob said would reduce staff by 100. It was also reported that a private donor would also match the government’s £3m grant.
Plans were made to consult on the redundancies of the 100 staff, however, reports emerged of a sexual abuse scandal which resulted in the private donation being withdrawn following much negative publicity. In August, the government grant was later recalled after the Respondent failed to adhere to the terms of the grant. This resulted in the Respondent being insolvent and all staff were made redundant.
Although the Respondent had planned to consult on the redundancies, the withdrawal of funding meant they could no longer do it. The Claimants, who numbered at over 140, believed they were entitled to their 90 days gross pay protective awards and initiated Tribunal claims.
The ET allowed the Claim, granting each Claimant a 90 days protective award. It held they should have begun consultation as soon as the grant was applied for and redundancies planned, the failure to obtain the grant and donation 3 months later did not constitute a special circumstance which mitigated their failure to consult.
The Respondent appealed. The EAT concluded the ET was right to believe the Respondent should have consulted in June because the Respondent was facing severe financial conditions with or without the grant.
No, in this case the time delay between the redundancy announcement and withdrawal of funding meant the inevitable loss of funding was not a special circumstance. However, the EAT did find that the negative publicity because of the abuse scandal could have been a special circumstance. However, this is an academic point due to the funding loss. The key issue for employers is to start consultation when plans are at a formative stage. Better too early than too late.