Collective Redundancy Consultation: Expiry of Fixed Term Contract Does Not Count Towards 20+ Headcount

University College v University of Stirling [2014] CSIH 5.

The collective redundancy consultation obligations do not apply to employees dismissed on expiry of their fixed-term contracts.  This is because for the purposes of collective redundancy consultation, the dismissal of an employee on the expiry of their fixed-term contracts is for a "reason relating to them as individuals".

Background

An employer must consult with appropriate representatives of affected employees when "proposing to dismiss" as redundant 20 or more employees at one establishment within a period of 90 days or less (section 188(1), Trade and Labour Relations (Consolidation) Act 1992 (TULRCA)).  A failure by the employer can lead to a protective award being made against the employer.

"Dismissal as redundant" means "a dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related"(section 195, TULRCA).

In University College –v- University of Sterling, the Scottish Court considered whether the expiry of fixed-term contracts were dismissals for redundancy as defined above.

Facts of case

• The University of Stirling engaged four employees on fixed-term contracts (three for specific projects and one for maternity cover).
• The contracts specified that they would end at a defined time.
• The contracts ended during a redundancy exercise.
• The University and College trade brought a claim on behalf of the employees, arguing that they were dismissed as redundant and Stirling had not complied with its collective consultation obligations.
• The tribunal considered whether the expiry of a fixed-term contract amounted to an employee being dismissed as redundant. In the tribunal's view, the expression "for a reason not related to the individual concerned" was unclear as the reason for dismissal will always relate to the individual in some way. A "reason relating to the individual" should be interpreted as a reason "direct and personal" to the individual, for example conduct or capability.
• The tribunal found that upon expiry of their contracts, the employees were dismissed as redundant. Stirling appealed.
• The EAT upheld Stirling's appeal and found that a reason relates to an individual if it has "something to do with him such as something he is, or something he has done". It is distinguishable from a reason relating to the employer, such as the need to change its business.
• Consultation is not required where the reason for non-renewal of a fixed-term contract is purely the termination, in the normal course, at a pre-determined agreed and defined date.
• In this case, at least one of the reasons for the employees' dismissals was the fact that they had agreed that their contracts would come to an end on a particular date or after a particular event. The reason for their dismissal was a reason relating to an individual as it depended on their own approach to their employment.
• University College appealed to the Court of Session.

Appeal outcome

The Court of Session agreed that the expiry of a fixed-term contract is not a dismissal for collective redundancy purposes.

The court saw nothing unclear or ambiguous about the wording of section 195. The difficult question was: did the reason for dismissal "relate" to the individuals concerned or not?

If an employer were to dismiss a large number of employees on fixed-term contracts due to demands of the business (rather than the expiry of the agreed finite term) then it would amount to a situation not related to the individual. However, in this case, as the fixed-term contracts entered into were on a voluntary basis for specific reasons (particular projects or maternity leave cover), the fact that each employee had entered into such a contract was a matter that related to the individual.

 Points to note

• This decision runs counter a prevailing view that the expiry of a fixed-term contract could give rise to a redundancy situation and thus impose collective consultancy obligations on employers.  In the earlier case of Lancaster University v The University & College [2011] IRLR 4, the EAT did not even question whether the expiry of fixed-term contracts could give rise to collective consultation; it assumed that it could and consequently did not discuss the issue any further.
• The Court of Sessions re-confirmed that simply because someone is employed under a fixed-term contract will not necessarily automatically excluded them from the statutory duty to consult collectively for redundancy. However, in this case, it was of particular importance that at least one of the reasons for the employees' dismissals was the fact that they had agreed that their contracts would come to an end on a particular date or after a particular event. The reason for their dismissal was a reason relating to an individual and not a reason relating to the employer.