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Whether ships within a fleet count as separate 'establishments' in collective redundancy consultation

News / / Whether ships within a fleet count as separate 'establishments' in collective redundancy consultation

Seahorse Maritime Ltd v. Nautilus International [2018] EWCA Civ 2789 

The Court of Appeal has recently held that individual ships chartered to clients all over the world, rather than the fleet of ships itself, were separate “establishments” for the purposes of collective consultation obligations. This decision has significant consequences in terms of the number of employees that could be made redundant on any one ship.

The statutory position

Section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 199 (“TULR”) provides:

"Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals.”

The background facts

Sealion Shipping Ltd (“Sealion”), a UK incorporated company, operates a fleet of support vessels chartered to businesses all over the world. At the time of the dispute, it operated 25 ships registered under the flags of various nations on different arrangements. These vessels were typically stationed outside Great Britain.

Seahorse Maritime Ltd (“Seahorse”), a company incorporated in Guernsey, supplied employees to work on Sealion’s vessels. Nautilus International (“Nautilus”) is Seahorse’s recognised trade union for collective bargaining purposes.

In 2015, the decision was taken to lay up (i.e. make idle) some of the ships in the fleet, which was liable to lead to redundancies in the workforce. Nautilus brought proceedings against Seahorse, claiming that it was in breach of its obligations under the TULR. There were two preliminary issues for the Employment Tribunal to decide:

a)  whether, by virtue of a connection with Great Britain, it had jurisdiction to determine the claim (“the territorial jurisdiction issue”); and

b)  whether the ships in the fleet on which employees of Seahorse were employed were to be considered as one “establishment”, or whether each ship was a separate establishment (“the establishment issue”).

The importance of the establishment issue was that if each ship were a separate establishment, it was very unlikely that at least 20 Seahorse employees would be liable to be made redundant on any one ship.

An employment judge held that the Employment Tribunal did have jurisdiction to entertain the claim and that each ship did not constitute a separate establishment. The Employment Appeal Tribunal (“EAT”) upheld the employment judge's decision on both points. Seahorse appealed to the Court of Appeal.

The Court of Appeal decision

The establishment issue

The Court of Appeal held that the term “establishment”, as defined by EU law, must mean the unit to which the workers made redundant were assigned to carry out their duties. Specifically, the Court of Appeal found that it was not essential for the unit in question to have legal, economic, financial, administrative or technological autonomy nor management functions, in order for there to be the necessary “establishment”. However, an “establishment” did require a certain degree of permanence and stability, had to be assigned to perform one or more given tasks and had to have a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks. The Court of Appeal stated that the focus ought to be on whether the “establishment” is a unit and whether it is a single “place”, and noted that it was not material whether the owner/operator of the unit was also the employer of some or all of the workforce.

On this basis, the Court of Appeal concluded that each ship as a self-contained operating unit was clearly an establishment. Furthermore, since the Seahorse crew were typically assigned to particular ships, these establishments could also be said to have workforces assigned to them.

The Court of Appeal stressed that this reasoning was specific to the present issue and the circumstances of the present case. Indeed, a self-contained team moving from location to location on a short-term basis, and employed by a different person than the owner or operator of a unit, was given as an example of a unit that would not be regarded as an establishment for these purposes.

Since the Court of Appeal was unable to determine to which establishments unassigned crewmen were assigned, it went on to consider territorial jurisdiction.

Territorial jurisdiction

The Court of Appeal held that the question of whether there was a sufficient connection with Great Britain fell to be answered by reference to the establishment - that is, the individual ships - and not to the individual employees assigned to them. Indeed, the Court considered that it could not have been the intention of Parliament, or the makers of the EU Directive from which the TULR is derived, that employers should be obliged by British or EU law to consult about the making of redundancies at establishments on the other side of the world, even if some of the workforce are UK nationals and/or live in Great Britain.

The vessels’ only connections with Great Britain were that some of Seahorse’s functions were performed through the UK-based agent. This, and the fact that the employer was based in the UK, was not sufficient to overcome the territorial pull of the place of work. It followed that the Tribunal did not in any event have jurisdiction to hear Nautilus' claim.

Comment

This decision mirrors that in USDAW and another v. WW Realisation 1 Ltd (in liquidation), Ethel Austin Ltd and another (C-80/14) (the ‘Woolworths’ case), in which it was held that each retail store was a separate establishment. It is, however, a welcome decision because it considers the application of the TULR outside Great Britain and clarifies that it is the “establishment” (each ship in this case) that must have the connection with Great Britain, rather than individual employees.

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