University and College Union v The University of Stirling (Scotland) [2015] UKSC 26

The University of Stirling failed to consult trade unions about non-renewal of limited term contracts during a redundancy process. The Supreme Court held that non-renewal of such contracts for reasons relating to the employer's business needs constitutes dismissal as redundant, requiring collective consultation.

Facts

In 2009-2010, the University of Stirling faced a projected deficit of approximately £4.4m and proposed to make up to 140 permanent staff redundant. It commenced collective consultation with recognised trade unions, including the University and College Union (UCU), on 15 July 2009. Following 134 voluntary severance applications, compulsory redundancies were avoided and the consultation process concluded in October 2009.

However, the University did not include in the collective consultation employees engaged on limited term contracts (LTCs) whose contracts were to expire during the consultation period. The Union complained that this failure breached section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992. Four test cases were considered:

• Dr Harris, a post-doctoral research assistant whose contract was not renewed on 16 August 2009;
• Dr Doyle, employed to deliver three undergraduate modules, whose contract ended on 29 May 2009;
• Ms Fife, employed for maternity cover under extended contracts;
• Ms Kelly, originally engaged for sick leave and maternity cover, latterly working on named research projects.

The Employment Tribunal found three of the four had been dismissed as redundant. The EAT held all four had been dismissed, but none as redundant ([2012] ICR 803). The Inner House agreed ([2014] CSIH 5). The Union appealed to the Supreme Court.

Issues

It was common ground that the expiry and non-renewal of an LTC amounted to a dismissal by virtue of section 95(1)(b) of the Employment Rights Act 1996. The sole issue was whether such dismissals were "as redundant" within section 195(1) of the 1992 Act, which defines redundancy as "dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related".

Arguments

The Union

Mr Caspar Glyn QC submitted that many, if not all, non-renewals of LTCs would have fallen within the pre-1993 definition of redundancy. The 1993 amendment was intended to broaden, not narrow, the scope of protection. The terms and conditions of an employee’s contract could not be treated as a "reason related to the individual", as this would defeat the legislative purpose of including business reorganisations within the duty to consult.

The University

Initially the University explained that the contracts had ended because funding had ceased, projects had completed, employees had returned from maternity leave, or fixed terms had expired. Before the EAT, its position evolved to argue that at least one reason for each dismissal was that the employee had agreed to an LTC accepting that it would end at a particular time or event — a reason said to relate to the individual.

Judgment

Lady Hale, with whom Lord Wilson, Lord Sumption, Lord Reed and Lord Hughes agreed, allowed the appeal.

The Court traced the evolution of the legislation, noting that section 195 was amended in 1993 following enforcement proceedings by the European Commission (Case C-382/92), which had found the previous definition too narrow because it did not cover dismissals resulting from new working arrangements unconnected with volume of business.

The Court rejected the approach of the EAT and the Inner House, which had held that entering into an LTC was itself a reason relating to the individual. Lady Hale observed that this approach would effectively exclude all LTCs from the consultation duty. This could not be correct for two reasons: first, if Parliament had intended such a blanket exclusion, it would have said so; second, by expressly excluding only some LTCs (and only from 6 April 2013), Parliament must have accepted that without that exclusion at least some LTCs fell within the scope of the duty.

The Court endorsed the EAT’s formulation of the test:

A reason relates to the individual if it is something to do with him such as something he is or something he has done. It is to be distinguished from a reason relating to the employer, such as his (or in the case of insolvency, his creditors’) need to effect business change in some respect.

The error, however, was to place the coming to an end of an LTC into the first rather than the second category. The relevant "dismissal" was the failure to offer a new contract once the LTC had expired. The fact that it was an LTC, or that the employee had agreed to it, could not by itself be the reason for non-renewal. The question was whether the reasons for the failure to offer a new contract related to the individual or to the needs of the business.

Applying this test: the ending of a research project (Dr Harris) or an undergraduate course (Dr Doyle) were reasons related to the employer’s business, not the individual. The ending of maternity or sickness cover would similarly relate to the business, since the need for the job to be done by someone other than the usual occupant had ended. Where, however, the employer still needed the work done but considered the particular employee unsuitable, the reason would relate to the individual and would not constitute redundancy.

The appeal was allowed and the case remitted to the Employment Tribunal for consideration of the remaining issues.

Implications

The decision clarifies the meaning of "dismissal as redundant" under section 195(1) of the 1992 Act in the specific context of LTCs as the law stood before 6 April 2013. The judgment establishes that:

• The mere fact that an employee was engaged on an LTC, or agreed to its limited duration, is not a reason "related to the individual" for the purposes of section 195(1);
• The proper inquiry focuses on the reasons for the failure to offer a new contract;
• Where non-renewal arises from changes in the employer’s business needs (ending of a project, course, or cover requirement), it falls within the scope of the collective consultation duty;
• Where non-renewal arises from individual factors such as conduct or capability, it does not.

The practical significance is largely historical, as Lady Hale noted that with effect from 6 April 2013 the United Kingdom has excluded LTCs from the consultation duty (save where dismissal occurs before the term’s expiry or task’s completion), bringing UK law into line with article 1.2(a) of Council Directive 98/59/EC. The decision therefore primarily affects pending claims relating to events before that date, and provides a definitive statement on the meaning of the redundancy definition in section 195 for cases falling within its temporal scope.

More broadly, the judgment offers guidance on the distinction between business-related and individual-related reasons for dismissal, which remains relevant to the wider operation of the collective consultation regime under section 188, particularly the requirement to consult on ways of avoiding dismissals, reducing numbers, and mitigating consequences where the impetus is the employer’s business circumstances rather than the conduct or capability of the individual.

Verdict: Appeal allowed. The case was remitted to the Employment Tribunal for consideration of the remaining issues.

Source: University and College Union v The University of Stirling (Scotland) [2015] UKSC 26