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08th July 2013

The aftermath of the Woolworths case - Collective redundancies

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Hot off the press, the USDAW –v- Ethel Austin Ltd (In Administration) ("USDAW") Employment Appeal Tribunal case is causing employment lawyers to do a "u" turn on decades worth of strategy deployed to minimise the need for collective redundancy consultations.

We think it is important that we give you the heads up on this landmark judgment, which has rewritten the law on collective redundancy consultation. USDAW is a case that needs to be on your radar should you be considering making redundancies, whether currently or in the future

Conventional wisdom

It has been a well established principle that the collective consultation obligations under the Trade Union & Labour Relations (Consolidation) Act 1992 (commonly known as "TULCRA") were triggered where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less (section 188 (1) of TULCRA). When these obligations apply, in very general terms the employer needs to consult with representatives of those at risk of redundancy and supply certain information to the representatives. Furthermore, there are minimum periods of time relating to the duration of the consultation before the first dismissals take effect.

Failure to comply with these obligations exposes the employer to what is known as a "protective award", which can be up to 90 days pay per employee affected by the proposed redundancies. The words "one establishment" have been crucial to lawyers. Although it has been accepted that there is a divergence between the parent European legislation governing collective redundancy consultation, UK Courts have previously resisted interpreting "one establishment" in line with European legislation. In doing so, this has meant employers have been able to undertake wide scale redundancies of 20 or more employees without engaging in a collective consultation process, by limiting redundancies at each different site (establishment), of their business, to 19 or less. That theory was bourne out in what has become known as the Woolworths case, which was the subject of litigation because no collective redundancy consultation was undertaken with employees who were in an establishment (i.e., a branch of Woolworths) with less than 20 employees.

EAT decision

The Woolworths case has now been overturned and the EAT has decided that it simply wants to ensure that our laws are in line with the European legislation requiring the deletion of the words "at one establishment", which in the present case allowed the employees of Woolworths, who were not included within the collective consultation initiated by the Insolvency Practitioner, to claim extensive protective awards.

What this means for employers

USDAW will have far reaching effects for employers in the light of the change in the law, albeit that the decision may be appealed. In essence, the obligation to consult collectively regarding redundancies now arises where 20 or more employees are proposed to be dismissed as redundant by the employer within a 90 day period, regardless of where they work. If therefore an employer was proposing to make, say, 24 employees redundant within that period, but those employees were spread evenly throughout 4 branches, the obligation to consult collectively will now nevertheless apply. Employers will have to go through full collective consultation procedures in most instances and some of the key points for employers to consider are:

  • redundancy exercises are likely to become more protracted and expensive;
  • advice should be sought as to when a collective consultation needs to be commenced as it can relate not only to redundancies but also to other types of dismissals, for example where an employer wishes to change terms and conditions which could result in dismissals and re-engagement. ; and
  • knowing when the trigger of 20 employees is reached may prove challenging for large organisations who operate throughout different establishments (branches, offices, sites and so on) and initiate small numbers of redundancies at those different establishments in isolation. A global person designated to control redundancies across the different establishments is advised.

For further information, contact Valerie Lambert on 01223 451166 or click here to email Valerie.