Collective redundancies need not be at one establishment
Subject to any further appeal, this case brings about a major change to collective redundancy law.
Historically where employers have proposed redundancies at different geographical sites within its business, they have treated each site as “one establishment” for the purposes of determining whether collective consultation is required. This has meant that an employer would only have to enter into collective consultation with bigger sites where 20 or more employees were to be made redundant, therefore avoiding collective consultation at smaller sites or indeed avoiding collective consultation altogether. This new interpretation of the legislation will mean that collective redundancies need not be at one establishment. Employers will have to look at the wider picture and avoid focussing on any one site when deciding upon the consultation process which should be implemented.
Under section 188(1) of Trade Union and Labour Relations (Consolidation) Act 1992 (“TULCRA”), employers are obliged to collectively consult where they propose to dismiss as redundant 20 or more employees “at one establishment” within a period of 90 days or less. Where an employer fails to inform or consult an Employment Tribunal may order an employer to pay a protective award to its employees (up to a maximum of 90 days’ pay).
In USDAW and others v WW Realisation 1 Ltd (in Liquidation) and another when Woolworths (and Ethel Austin) became insolvent in 2008, claims for protective awards were brought by the union on behalf of former employees. An Employment Tribunal held that each store was a separate establishment, and consequently, the duty of collective consultation was not triggered in stores where fewer than 20 employees were to be made redundant. Therefore, those employees did not receive a protective award.
The Union appealed on behalf of the employees who did not receive a protective award. It argued that the term “at one establishment” was incompatible with the underlying EU Directive and left workers vulnerable to redundancy without fair consultation.
The EAT found in favour of the trade union and overturned the Employment Tribunal’s decision that each store was a separate establishment for the purposes of TULCRA. Therefore, all of the employees from the smaller stores (3,233 at Woolworths and 1,210 at Ethel Austin) will now be entitled to a protective award.
The EAT judgement concluded that: “The simple proposition we have recorded is there should be some interpretation to yield the outcome that the obligation arises when 20 or more are to be dismissed irrespective of where they work”. They ultimately held that the words “at one establishment” should be deleted from 188(1) of TULRCA.
This decision is highly significant as it changes the face of UK redundancy law and potentially significantly extends an employer’s collective consultation obligations.
Furthermore, it is important to remember that the collective consultation duty does not just apply to redundancy. It can also apply to situations such as changes to terms and conditions which would result in dismissal.