The High Court has set aside a decision of the Labour Court which had found that the appellant, Debenhams Retail Ireland Limited ("Debenhams"), had been in breach of its obligations under section 9 of the Protection of Employment Act 1977 (the "1997 Act").
Section 9 provides that where an employer proposes to create collective redundancies, it must, with a view to reaching agreement, initiate consultations with employees' representatives. Those consultations must include the possibility of avoiding the proposed redundancies, reducing the number of employees affected by them or mitigating their consequences by recourse to supports for redeploying or retraining employees made redundant. The section further provides that consultations must be initiated "at the earliest opportunity" and, in any event, at least 30 days before the first notice of dismissal is given.
Subsequent changes to the law
This judgment deals with the version of the 1997 Act which was in force in April 2020, the time at which the collective redundancies at issue in this case occurred. It is worth noting that the 1977 Act was amended in 2024 by the Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024 (the "2024 Act"). The 2024 Act introduced a number of changes to the law on collective redundancies, including the extension of information and consultation obligations beyond the employer to encompass "responsible persons", i.e. liquidators, provisional liquidators, receivers or any other person appointed by the Court where that person has assumed full responsibility for the management of the business concerned.
Labour Court decision
The Labour Court had held that the consultation process required under section 9 of the 1977 Act ought to have started on 9 April 2020. It found that the consultation process did not start until 17 April 2020, as a result of which certain options to ameliorate the effect of the collective redundancies were no longer available. The Labour Court awarded compensation to the respondent. That award was by way of a test case, with the High Court noting that there are approximately 792 other cases concerning employees in a similar position to that of the respondent.
Therefore, while the compensation awarded in this particular case was not large (four weeks' remuneration amounting to €1,140), the knock-on implications of the decision to award compensation were significant, both in respect of other former employees of Debenhams but also more broadly in respect of other employers.
Appeal to the High Court
The appeal to the High Court was on a point of law. Debenhams argued that the Labour Court was wrong as a matter of law in holding that the obligation to commence consultations under section 9 arose on 9 April 2020; that the Labour Court erred in law in finding that the process only commenced with the holding of the first consultation meeting on 17 April 2020; that the Labour Court erred in law in finding that available options had been lost by that delay of eight days; and that there was no basis in law for awarding compensation to the respondent.
Factual background
As detailed in the judgment, the factual matrix and timeline of events in this case were relevant to the ultimate findings of the High Court. The Court notes that these events took place during a period of unprecedented lockdown due to the Covid-19 pandemic. In addition, the events took place in the period leading up to and after the Easter Bank Holiday weekend in 2020.
Debenhams was a wholly owned subsidiary of an English group of retail shops and had been in examinership in 2016. It had traded at a loss in the years 2017–2019 and had only been able to continue trading due to extensive financial support provided to it by its parent company since 2016. At 9.35pm on 8 April 2020, the Board of Directors received notification from the parent company that it would not be providing any further funding. On the following day, 9 April 2020, the Board met and resolved to advise the parent company that they should instruct the directors of the Irish company to seek the appointment of provisional liquidators to Debenhams.
On 14 April 2020, the administrators of the UK parent company directed the Board to seek the appointment of provisional liquidators. On that same day, one of the directors provided the respondent's trade union representative with information about the proposed redundancies. By further email on 15 April 2020, the director advised the union representative that there would be a meeting on 17 April 2020 between management and the union to discuss the issue of collective redundancies. On 16 April 2020, provisional liquidators were appointed over the company. On 17 April 2020, the first consultative meeting was held between the provisional liquidators, the Board and the respondent's trade union representatives.
Decision of the High Court
Obligation to hold consultations "at the earliest opportunity"
The High Court accepted that, in considering the obligation contained in section 9(3) of the 1977 Act to hold consultations "at the earliest opportunity", this had to be considered within the practicalities of life on the ground at that time (emphasis added). It held that the Labour Court was entitled to make the finding that as and from 9 April 2020 (i.e. the day on which they resolved to instruct the parent company to seek the appointment of provisional liquidators), the Board was compelled to consider making collective redundancies, as having regard to the dire financial and trading history of the company, it had to be apparent that collective redundancies would have to be made once funding was withdrawn.
It also considered that the Board had also resolved to "consider and undertake to do the various requirements regarding collective redundancies under the relevant employment legislation as per advice to be provided by their legal advisors in Ireland, including the issuing of a notification to the relevant government minister". Further, it noted that the Labour Court had regard to the letter sent to the employees by a member of the Board on 9 April 2020, informing them of events and the intention of the company to make application to the High Court to have a provisional liquidator appointed. Therefore, the Court was satisfied that the Labour Court was correct in finding that the obligation to commence consultations arose on that date.
Labour Court erred in finding that the consultation process commenced on 17 April 2020
However, the High Court found that the Labour Court had erred in law in finding that the consultation process commenced with the holding of the meeting on 17 April 2020. The High Court found that the consultation process in fact began with the sending of information by letter by the director to the union representative on 14 April 2020. While the word "consultation" was not used in that letter, it was clearly stated at the start of the letter, that the information was being supplied in accordance with section 10 of the 1977 Act. The letter went on to give all the information that was required under section 10. In particular, it indicated that all employee roles within the company were being proposed for redundancy. The High Court found that this was critical information which the workers' representatives had to have in advance of having any meaningful consultation meeting with the liquidators or the Board of Directors.
The Court went onto say that the Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States 14 relating to collective redundancies and the Act do not state that a consultative meeting represents the start of the consultation process required under their provisions. The Court was satisfied that the consultation process required was one that can start in advance of the first consultative meeting by the provision of the information required by section 10.
Impact of the delay
The third ground of challenge concerned the finding by the Labour Court that the delay from 9 April 2020 to 17 April 2020 meant that certain unidentified options were no longer available due to the appointment of provisional liquidators in the interim. The High Court found that there was no evidence before the Court that any options had been lost due to any delay. Therefore, as this finding was made without evidence, the High Court held that it could not stand.
Question of compensation
Finally, the High Court held that the Labour Court erred as a matter of law in awarding compensation to the respondent. It noted that the Labour Court is given the power to award compensation to employees under section under the 1977 Act of such amount as it deems to be just and equitable having regard to all the circumstances, when there has been a failure by the employer to comply with its consultation obligations under sections 9 and 10 of the 1977 Act. However, the Court noted that the Labour Court has no jurisdiction to impose a penalty on the employer.
On the facts, the High Court was satisfied that there was no evidence that the respondent had lost any pecuniary benefit, or suffered any financial loss, because of any delay on the part of Debenhams in commencing consultations with the union representatives between 9 April 2020 and 14 April 2020. It stated that, while compensation is not limited to compensation for financial loss, it must be referrable to some form of loss or injury suffered by the person being compensated. It further noted that if Debenhams had tried to make any payments to the employees prior to the appointment of the provisional liquidators, or to make any beneficial deals with them, these payments and deals would have been struck down by the High Court as unfair preferences pursuant to sections 604 and 608 of the Companies Act 2014, as amended.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
