Case Comment: The United States of America v Nolan  UKSC 63
02 Wednesday Nov 2016
This judgment concerns the failure on the part of the appellant to consult an employee representative when proposing to dismiss the respondent.
In 2006 the USA closed a watercraft repair centre (the “Base”) in Hampshire. The respondent was employed at the Base by the appellant and was dismissed for redundancy the day before it closed. The respondent complained that the appellant had failed to consult with any employee representative when proposing to dismiss her. The appellant denied any such duty.
Part IV Chapter II Trade Union and Labour Relations (Consolidation) Act 1992 (“TULCRA”) as amended by The Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995 (SI 1995/2587) (the “1995 Regulations”)
TULCRA as originally enacted by Parliament went beyond the requirements of European law under Council Directive 77/187/EEC (now under Council Directive 98/59/EEC) in extending a right to be consulted prior to redundancies to employees of public administrative bodies, such as those at the Base. But it fell short of European law in that it was confined to circumstances where employees enjoyed union representation recognised by the employer.
In 1994 the CJEU identified this failure, and in consequence the Secretary of State – relying on the power to make secondary legislation conferred by section 2(2) of the European Communities Act 1972 (the “1972 Act”) – made the 1995 Regulations, which amended TULCRA to require employee representatives to be designated for consultation purposes in all situations covered by TULCRA.
On the basis of TULCRA as amended, the respondent succeeded before the Employment Tribunal and was granted an order for remuneration for a one month period. The Employment Appeal Tribunal upheld the order.
Court of Appeal
The Court of Appeal referred to the CJEU the question whether the obligation to consult arose on a proposal or only on a decision to close the Base. The CJEU declined jurisdiction, holding that (i) because Directive 98/59/EEC is an internal market measure covering economic activities, national defence and the dismissal of staff at a military base are outside its scope; and (ii) it was not appropriate to rule on a question relating to a public administrative establishment to which the Directive did not apply.
The grounds for appeal
The USA appealed to the Supreme Court on three grounds:
- TULCRA should, in the light of the Court of Justice’s ruling, be construed as not applying to employment by a public administrative establishment, at least as regards non-commercial (jure imperii) activity such as closure of a military base decided at the highest level in Washington;
- the same result should be reached in the light of principles of international law and EU law;
- In any event, the Secretary of State exceeded the powers conferred by the 1972 Act, s 2 when making the 1995 Regulations, in so far as these went further than EU law requires by protecting workers without trade union representation employed by public administrative establishments.
The Supreme Court’s Decision
The Supreme Court dismissed the USA’s appeal.
Ground (1): That the present situation might not have been foreseen by the legislature is not a reason for reading into clear legislation a specific exemption which would not reflect the scope of any exemption in EU law, especially when the foreign state could have invoked state immunity but did not do so in time.
Ground (2): Jurisdiction is primarily territorial in both international and domestic law. TULCRA regulates the procedures for dismissal on the grounds of redundancy of employees at institutions in England, Wales and Scotland. The UK is not legislating extra-territorially when it covers proposals or decisions about domestic redundancies developed or taken abroad.
Ground (3): Parliament had by its original enactment of TULCRA established a unified domestic regime drawing no distinction between different parts of TULCRA within or outside the EU’s internal market competence. In these unusual circumstances, Parliament could be taken to have created for the domestic purposes of the 1972 Act, s 2(2) a relationship which the Secretary of State was entitled to take into account and continue by and in the 1995 Regulations. The submission that the 1995 Regulations went beyond the Secretary of State’s powers in protecting employees of public administrative establishments without trade union representation was therefore rejected.
The UKSC held that neither EU law nor international law made the USA exempt from collective redundancy consultation obligations under TULCRA. Where an employer intends to dismiss as redundant twenty or more employees within a period of ninety days or less they must consult the employees’ representatives. Though this requirement does not apply to Crown employees, the USA does not qualify as a Crown employer. The common law principles of state immunity allows foreign countries to plead state immunity, the USA could have pleaded state immunity from the outset, however in this case it failed to do so. Prior to the remedies hearing the USA asked the court if it had the power to order redundancy payments in light of the principles of state immunity, however the court ruled that because the USA had already submitted the appeal and had not pleaded state immunity from the outset, it was unable to consider this submission. The facts of this case therefore make an important point to foreign countries when taking part in legal proceedings: consider at the earliest opportunity, and if possible before commencing litigation, whether or not state immunity is an applicable principle.
The grounds upon which the UKSC dismissed the appeal raise a number of important points. Firstly, in the process of statutory interpretation, just because a situation might not have been foreseen by Parliament is not a reason for reading into clear legislation a specific exemption. And secondly, decisions taken outside the jurisdiction of England and Wales that have a legal consequence inside this jurisdiction are justiciable by the courts – the fact that the decision was taken outside of England and Wales was irrelevant in this case.
The case will now return to the Court of Appeal where it will be decided whether the duty to consult arises when there is a proposal to make a business decision that will lead to redundancies or when that decision has been made.