The law says that when an employer proposes to dismiss as redundant 20 or more employees at one “establishment”, they have to consult with the appropriate representatives. In Seahorse Maritime Ltd v Nautilus International, the Court of Appeal held that for a unit to constitute an establishment, a workforce just has to be assigned to it, irrespective of whether the owner of the unit is also the employer.
Seahorse Maritime Ltd, which was based in the UK, supplied crew members to specialist ships operated by other companies, including Sealion Shipping Ltd, which were mainly located outside the UK. Seahorse employees were required to work on any of Sealion’s ships. Most tended to stay on the same ship to which they were rostered for a period of four to six weeks although some moved between ships.
Due to a fall in oil prices in 2014/15 Sealion took some ships out of service putting those crew members at risk of redundancy. Nautilus (the recognised trade union) claimed protective awards for UK-based crew members under section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) on the basis that the company had failed to consult with it although it was proposing to dismiss 20 or more employees as redundant, contrary to section 188. However, for the collective provision to apply, the union had to show that the fleet, as opposed to individual ships, counted as an “establishment”.
Tribunal and EAT decisions
The tribunal held that although individual ships could be “establishments”, the whole fleet in this case was a single establishment as the employees were not assigned to a particular ship and the ships were not owned by Seahorse. As such, the obligation to consult applied. There was also a sufficiently strong connection between the employees based in the UK and UK employment law for their claims to be heard here.
The EAT agreed that the relevant establishment had to be the unit within the employer’s organisation to which the redundant employees were assigned. As the ships were not owned by Seahorse, each ship could not be an establishment for the purposes of collective consultation. As for the territorial scope of the union’s section 189 claim, the EAT held that the judge was right to focus on the individual employee’s connection to the UK. As they were domiciled in Britain, their contracts were governed by English law and Seahorse was based in the UK, there was a sufficiently strong connection with Britain for their claims to be heard.
Decision of Court of Appeal
The Court of Appeal, however, disagreed. It held that, for a unit to constitute an establishment, all that was necessary was for a workforce to be assigned to it. It was irrelevant whether the employer was also the owner of the unit or not. As particular crew members were assigned to particular ships, each ship was an establishment and it was therefore very likely that there was no obligation on Seahorse to consult them.
It then considered the issue of the “territorial scope” of the rights conferred under the Act, concluding that, as the connection had to be with the “establishment” (in this case, the ship) and not the individual seafarers, there was not sufficient connection between the ships and the UK for the case to come within UK law.
The issue of territorial jurisdiction comes up rarely, but should be considered carefully when it arises. However, this case is an important reminder of the importance of defining “establishment” in collective consultation cases. The Court of Appeal stated that the European Court of Justice had defined establishment as “the unit to which the workers made redundant are assigned to carry out their duties” even if the decision to make those redundancies came from a higher level.