No Collective Redundancy Consultation Obligations on Expiry of Fixed-term Contracts

Collective redundancy consultation obligations were not triggered when fixed-term contracts expired. 

In University of Stirling v University and College Union, the EAT had to consider for the first time whether collective redundancy consultation obligations apply when an employee is dismissed on the expiry of a fixed-term contract. 

S188 Trade Union and Labour Relations (Consolidation) Act 1998 requires collective consultation in respect of large-scale redundancies. A redundancy is defined more widely than for redundancy payment purposes and covers any dismissal ‘for a reason not related to the individual concerned or for a number of reasons all of which are not so related’. Whilst this will cover a classic redundancy dismissal, it also extends, for example, to the situation where an employer seeks to change terms and conditions of employment through dismissal and re-engagement. 

The employees were employed on fixed-term contracts for a specific project or for maternity or sick leave cover. The employment judge held that collective consultation obligations applied as they had been dismissed ‘for a reason which did not relate to them as individuals’. He considered that a reason will only relate to an individual if it is a close and direct one involving something that is personal to the individual, such as conduct or capability. 

The EAT upheld the employer’s appeal. There was no need to import a new definition of ‘relating to an individual’ into the statute by applying a test of ‘direct and personal’. The judge ought to have asked himself whether, on the facts before him, the dismissals were for reasons not related to the individuals concerned. He had been wrong to assume that dismissal on grounds that the employee had knowingly agreed to a fixed-term contract could never be a reason relating to the individual concerned. A reason relates to the individual if it is something to do with him, such as something he is or something he has done. This is to be distinguished from something relating to the employer, such as the need to effect business change. 

At least one of the reasons for each of the dismissals was that the employee had agreed to a fixed-term contract accepting that it would come to an end at a particular date or on the occurrence of a particular event. The reason for dismissal depended on each individual’s own approach to their employment with their employer and was, therefore, a reason related to the individual. Collective consultation obligations did not therefore apply. 

This is the first time that the EAT has had to consider whether collective consultation obligations apply when fixed-term contracts expire. Up until now, most people have considered that the expiry of fixed-term contracts will count as dismissals triggering collective redundancy obligations so that, for example, if fixed-term contracts are expiring around the time of ‘standard’ collective redundancies they will count towards the number of dismissals when determining whether 20 or more redundancy dismissals are proposed. 

The decision in this case suggests that each dismissal on the expiry of a fixed-term contract must be considered on its facts to see whether the dismissal is for a reason related to the individual concerned. The court indicated that if the reason for non-renewal is due to a business decision which might cause significant job losses but does not involve any focus on the individual fixed-term contract employee, then collective consultation may be required. Where, however, the reason is simply the termination, in the normal course, of a fixed-term contract at a previously agreed and planned date, or event, then collective consultation obligations do not apply. 

The problem with the court’s approach is that the majority of employees who enter into fixed-term contracts do so accepting that they will come to an end at a particular date or on the occurrence of a particular event. The EAT in this case said that that is a reason which relates to the individual. Since under the legislation the collective redundancy obligations only apply where none of the reasons for dismissal relate to the individual, it is hard to see how they can ever apply on the expiry of a fixed-term contract. Nevertheless we would recommend a cautious approach and if wider business factors are involved in a decision not to renew a fixed-term contract then employers should count these dismissals when determining whether collective consultation obligations are engaged.