87: Employment Appeal Tribunal rules that charity breached collective redundancy consultation obligations

In Keeping Kids Company v Smith and others, the Employment Appeal Tribunal (EAT) upheld the decision of the Employment Tribunal that a charity had breached its collective redundancy consultation obligations prior to its liquidation, and that the special circumstances defence did not apply.

During 2014, Keeping Kids Company (KKC), a charity which assisted disadvantaged children, experienced serious financial difficulties. On 12 June 2015, KKC applied to the Government for a grant of £3 million. The application included a plan to restructure the charity by late September 2015 which envisaged that over 50% of posts might be deleted, but did not identify any specific posts at that stage. On 29 July 2015, the Government offered a grant based on this restructuring plan. However, on 30 July, they received notification of a police investigation into safeguarding issues at KKC. This led to termination of the grant agreement on 3 August. On 5 August, the charity closed and all employees were dismissed. A number of employees brought claims for protective awards for failure to inform and consult over collective redundancies.

The Employment Tribunal upheld these claims, ruling that the obligation to consult was triggered on 12 June, even though KKC did not know at that stage who it was proposing to dismiss, and that there were no special circumstances providing a defence to this obligation.

The EAT dismissed KKC’s appeal. It upheld the Tribunal’s finding that, as at 12 June when the grant application was submitted, there was a clear, albeit provisional, intention to dismiss for redundancy and that this proposal could affect all staff. The EAT did not agree with KKC’s contention that it did not have sufficient information to comply with its obligations or to engage in meaningful consultation until it had received the Government’s response to its grant application. There was no obligation to provide the names of the employees who would be dismissed, and in any event the requirement for ongoing consultation allows for the possibility that new information will become available during the process. The EAT also rejected KKC’s argument that either the outstanding grant application or notification of the police investigation on 30 July amounted to special circumstances which prevented compliance with its collective consultation obligations. These events did not affect the breach between 12 June and 30 July 2015.

This decision confirms that employers must begin collective consultation when there is a clear intent to dismiss at least 20 employees for redundancy even if those employees have not yet been identified, given that additional information or changes in the proposals can be communicated to employees throughout the consultation process. The financial consequences of failing to commence consultation in good time are potentially significant, since each affected employee can be awarded up to 90 days’ pay. Although Tribunals are very reluctant to allow employers to rely on the special circumstances defence, any mitigating factors may still be relevant when assessing the amount of compensation payable to employees.