Section 195 of the Trade Union and Labour Relations Consolidation Act (TULRCA) 1992 defines redundancy for the purpose of collective consultation as: “… dismissal … for a reason not related to the individual concerned …”. In UCU v University of Stirling, the Supreme Court held that the termination of limited term contracts was a reason related to the employer’s business, not to the individual concerned.
In order to deal with a budget deficit in 2010 the University of Stirling proposed to make up to 140 of its permanent staff redundant. In accordance with section 188(1) of the 1992 Act, it undertook collective consultation on 15 July 2009 with the UCU among others, but did not include employees on limited term contracts (LTCs, also known as fixed term contracts) which came to an end during the consultation period.
The union argued that these employees should have been included and brought four test cases to the tribunal. The university did not consider that it needed to include LTCs in the collective consultation process.
Decisions of lower courts
The tribunal held that for a reason to be related to the individual it must be a close and direct one personal to the individual rather than the employee’s job or the employer’s need to have work done.
The EAT, however, said that “a reason relates to an individual” if it has something to do with them such as something they have done. It has to be distinguished from a reason relating to the employer. It was clear in these cases that at least one of the reasons for all four dismissals was that the employee had agreed to an LTC, accepting that it would come to an end at a particular date or on the occurrence of a particular event. In other words, a reason relating to the individuals concerned. The Court of Session in Scotland (the equivalent of the Court of Appeal in England) agreed.
Supreme Court decision
The Supreme Court, however, did not agree. It held that the issue of whether employees on LTCs, whose contracts come to an end within the relevant period, have been dismissed as redundant depended on two questions. The first was whether the expiry and non-renewal of an LTC amounted to a dismissal for this purpose. Dismissal of an LTC is defined in the Employment Rights Act 1996 as occurring when the contract terminates by virtue of a limiting event without being renewed under the same contract. On this definition it was accepted by the parties that the LTCs were dismissed.
The second question was whether the dismissal was “for a reason not related to the individual concerned”. The definition of redundancy under the 1992 Act was amended in 1993 following enforcement action by the European Commission on the ground that the definition was not wide enough (for the purposes of the Collective Redundancies Directive).
The Court said that Parliament cannot have intended to narrow the scope of the consultation duty under the previous law. Further, Parliament had specifically legislated in order to encompass situations where employees are dismissed and offered new contracts on different terms. Consequently, the terms and conditions of employees’ employment contracts cannot be a “reason related to the individual concerned”. If they were then the business rearrangements which were the reason the law had been amended would not be covered.
When an LTC comes to an end, the “dismissal” is the non-renewal of the FTC or rather the failure to offer the employee a new contract. The question is whether the reasons for the failure to offer a new contract relates to the individual or to the needs of the business. A reason relates to the individual if it is something to do with them or something they have done. The fact that it was an LTC or that the employee agreed to an LTC cannot, by itself be a reason for the non-renewal. Therefore the coming to an end of an LTC was for a reason related to the employer’s business, not to the individual concerned.
The law was amended while the case was on appeal with the result that LTCs are now excluded from the collective consultation provisions, unless the person is dismissed before the expiry of the term or the completion of a task.