In Seahorse Maritime Ltd v Nautilus International (2018), the Court of Appeal considered both the definition of a single establishment and the territorial scope of the duty of collective consultation under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A).
Under section 188, employers are obliged to inform and collectively consult where they propose to dismiss as redundant 20 or more employees at one establishment within a period of up to 90 days.
Seahorse employed crew to work on a fleet of oil rig support ships operated by Sealion. Most of the ships operated exclusively outside UK territorial waters. Due to a downturn in the oil industry, Sealion could not find charters for many of its ships so made redundancies from among its employees, but without collective consultation.
Nautilus International, a trade union, brought a claim seeking protective awards for failure to collectively consult under TULR(C)A. Seahorse defended the claim on jurisdictional grounds (as the employees were not UK based) and on the grounds that each ship was a separate establishment so the threshold of 20 redundancies at one establishment was not met, albeit there were more than 20 redundancies across the whole Seahorse workforce.
The ET and the EAT
The employment tribunal (ET) and the Employment Appeal Tribunal (EAT) both upheld Nautilus’ claim, and found that the ships were not separate establishments and that the employees had a sufficiently strong connection to Britain to enjoy the protection of section 188.
They found the employees were not contractually assigned to a particular ship and were at times transferred from one ship to another. Accordingly, it was held that each ship was not a distinct unit of Seahorse’s undertaking.
In relation to territorial scope, the EAT found the employees were ‘international commuters’ as the employment contracts were stated to be governed by English law and Seahorse used a British registered company to manage the employees. The contracts also mentioned that the duties of employees started as soon as they left their home, and included travel to the ships.
The Court of Appeal
The Court of Appeal found that, at least in the typical case, Seahorse crew were in fact assigned to particular ships (irrespective of the contractual flexibility) and that each ship was indeed an establishment. It was clearly a self-contained operating unit of the kind described in the UK and European case law.
The court also decided that there was not a significant connection with Britain to overcome the fact that the employees essentially worked abroad.
The Court of Appeal noted that the obligation created by section 188 sat at a collective level. Accordingly, it was necessary to focus on the one common feature which defined the group – the establishment, ie in this case, the ships. Otherwise, the employer (and any tribunal) would need to undertake individual assessments to determine which employees were to be taken into account in relation to the numerical threshold under section 188 which would be wholly undesirable.
Given the only connection between the ships and Britain was that some, though not all, of Seahorse’s functions were performed through its Farnham-based agent, it was concluded that there was not sufficient connection to trigger any obligation under section 188.
Thus, Seahorse’s appeal succeeded and Nautilus’ claim in relation to the failure to consult on the proposed redundancies of Seahorse crew was dismissed.
The Court of Appeal judgment confirms two key points:
- That ships can constitute separate ‘establishments’ for the purposes of section 188 (in the same way that shops in a chain have been held to do), as long the crew members are in practice, assigned to a particular ship.
- That collective rights under section 188 are regarded differently to individual rights under the Employment Rights Act 1996. Thus, in determining jurisdiction for section 188 purposes, the focus is not on the connection any given individual has with Britain, which might vary considerably, but rather the connection the establishment (the individual ships in this case) has to Britain.
Dos and don’ts in considering section 188 obligations
- Examine the reality of workforce location and organisation (not simply what the contract may say) in determining ‘one establishment’;
- Consider any territorial applicability by reference to the connection the identified ‘establishment’ has to Britain.
- Rely on pure contractual rights or obligations which are not exercised in practice to determine what may or may not constitute an establishment;
- Use the connections to Britain of the individuals in the establishment (which are used for ascertaining individual employment rights) to determine collective, eg section 188 rights.
Nick Evans is a partner in the employment team at Fletcher Day