In the recent case of Seahorse Maritime Ltd v. Nautilus International the Court of Appeal considered the meaning of "establishment" in the context of an employer's duty to collectively consult during a redundancy process under Section 188 of the Trade Union and Labour Relations (Consolidated) Act 1992 (TULRCA) and also clarified the position on territorial scope of TULRCA.
The duty to collectively consult is triggered where a proposal exists "to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less".
Seahorse Maritime Limited (Seahorse), a Guernsey incorporated company, employed a number of individuals to serve on any ship managed by a third party, Sealion Shipping Limited (Sealion). The contracts of employment between Seahorse and its employees did not allocate them to a particular ship. The employees were primarily stationed outside British territorial waters and normally stayed on the same ship for the duration of their four- to six-week roster.
In 2015, Sealion decided to take four ships from its fleet of 25 out of service, which meant Seahorse's employees were at risk of being made redundant.Seahourse dismissed more than 20 employees working in Sealion's fleet but did not collectively consult.
Nautilus, the trade union recognised by Seahorse, subsequently brought a claim in the ET arguing that the UK-domiciled employees of Seahorse were entitled to a protective award as Seahorse failed to collectively consult.
The Tribunal looked at two key issues:
whether one ship or the whole fleet was considered to be an "establishment" for collective consultation purposes; and
whether the court has jurisdiction to hear the case on the basis that the "establishment" and/or the employees did not have a sufficient connection with Great Britain.
ET and EAT judgment
The ET found that the ships of the fleet collectively were capable of being one establishment for the purposes of TULRCA. On the facts, it found each ship could not be said to be a separate part of Seahorse's undertaking. This was, in part, because the employees' contracts did not assign them to a particular ship and some employees had been able to move between ships.
The ET also held that the collective consultation obligations under TULRCA applied to the UK-domiciled employees who were working on the ships in question.
Seahorse appealed to the EAT, which upheld the ET's judgment. Seahorse then appealed to the Court of Appeal, which allowed the appeal.
Court of Appeal judgment
The Court of Appeal disagreed with the ET and the EAT. It decided that each ship was its own establishment. The reasons were that an establishment does not need to have any legal, economic, financial, administrative or technological autonomy to be regarded as an establishment. It also does not need to have a management capable of independently effecting collective redundancies. The court decided that each ship was a self-contained operating unit and a de facto separate establishment to which a workforce was assigned. The court also found that the employees were assigned to specific ships, most employees returned to the same ship for long periods of time and correspondence to the employees made reference to a particular ship, where it was known.
On the issue of territorial jurisdiction, the court found that the issue of whether there is a sufficient connection to Great Britain relates to the establishment in question as opposed to the individual employees. This is because the primary obligation is to consult with employee representatives, not with individuals.
Given that the only connection between the ships and Great Britain was that some of Seahorse's functions were performed by an administrative agent based in Surrey, the court decided this was not a sufficient connection to Great Britain.
For these reasons, Seahorse’s appeal succeeded and Nautilus' claim was dismissed.
Implications for employers
The "establishment" element of this case is a helpful reminder of the Woolworths case and the factors that must be considered when deciding whether a particular "unit" is an establishment for the purposes of TULRCA.
The territorial jurisdiction element is more interesting. Previous case law relating to employees who work outside of Great Britain has focused on rights under the Employment Rights Act 1996 and the Equality Act 2010 but this case provides clarification in respect of TULRCA. Instead of focusing on whether individual employees themselves have a sufficient connection with Great Britain, employers should focus on the establishment's connection with Great Britain.