The respondent, the Carillion group, was a company listed on the FTSE100.   At its height, it had a turnover of £5.2 billion in 2016.  In late 2017 and early 2018 the company was subject to heavy press coverage concerning its financial situation (and the wider effect it may have on unemployment).

The respondent went into compulsory liquidation in January 2018, and it resulted in a large number of their employees being dismissed.  The claimants brought claims for protective awards under Section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992 on the basis that the respondent had failed in its duty to consult.

At the Tribunal, the respondent agreed that there had been a failure to consult but stated they could avail of the defence of ‘special circumstances’ as outlined in Section 188(7) of the 1992 Act which states that if it is not reasonably practicable for the employer to comply with the requirements, such as the duty to consult, then it is for the employer to take all such steps that are reasonably practicable in the circumstances.  The argument being made by the respondent was that the weekend of the 13-14th January had ‘sudden’ events and that they had been declined lending arrangements as well as failing to secure Government backing.

The Tribunal rejected the respondent’s argument stating that for the circumstances to be ‘special’ they must be uncommon.  It was held that insolvency may indeed be a special circumstance but not where there has been a gradual running down of the company.  The decline had been from July 2017, and it would be incorrect to view it in a vacuum of the weekend of 13-14th January.

The respondent appealed to the EAT.  The EAT dismissed this appeal agreeing with the Tribunal’s distinction between a sudden disaster when it comes to insolvency compared to one where the company has been gradually declining for a series of months.   It also rejected the argument that it was impossible for the company to consult when it came to how the dismissals could be avoided.   This was seen as affecting the ability to comply rather than being a special circumstance with the meaning of the legislation.  Accordingly, the respondent’s appeal was dismissed.

Practical Lessons

This case demonstrates the requirement to consult (where there are dismissals for redundancy) cannot be overridden merely because there is an insolvency situation.  Instead, there needs to be an examination as to whether the insolvency is a special circumstance which will allow the Tribunal to look at the background and the lead-up to the insolvency.  In Carillion there was a steady decline for a series of months as a result of mismanagement and the company holding out for a government bailout, which had never been promised and was never delivered. 
https://www.gov.uk/employment-appeal-tribunal-decisions/carillion-services-ltd-in-complusory-liquidation-and-others-v-mr-c-benson-and-others-ea-2021-000269-ba-previously-ukeat-slash-0026-slash-21-slash-ba