The eagerly awaited Employment Appeal Tribunal's judgment in the "Woolworths case" has been issued and has turned the law as we have known it for the last 20 years on its head. The EAT has held that collective redundancy consultation obligations arise when 20 or more employees are to be dismissed within a period of 90 days irrespective of where they work. This decision has huge ramifications, particularly for companies who have traditionally been able to avoid collective redundancy obligations by keeping redundancy numbers below the threshold in each division or site.
Prior to this decision, the question of 'what is an "establishment"?' had exercised even the most agile of legal minds for some time. Case law, including a decision of the Northern Ireland Industrial Tribunal in 2010, had permitted employers to treat different sites, locations or divisions as distinct establishments, so that collective consultation was not required for those sections at which the employer was proposing to dismiss less than 20 employees.
Now we are told by the EAT that the "establishment question" need not be considered by an employer proposing redundancies going forward – the EAT has stated in very clear terms that the concept of "establishment" is irrelevant in determining whether collective redundancy obligations are triggered.
A quick recap: the law prior to the 'Woolworths case'
Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1998 was the piece of legislation under the spotlight. This states "where an employer is proposing to dismiss as redundant 20 or more employees at one establishment (our emphasis) 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..". This language is mirrored in the Article 216 of the Employment Rights (Northern Ireland) Order 1996, the legislation applicable in Northern Ireland.
If triggered, the statutory consultation obligations require:
Consultation with the appropriate representatives, either a trade union, or if there is no trade union in place, employee representatives appointed or elected by the employees for the purposes of the redundancy consultation;
The provision of certain information about the proposals to the appropriate representatives;
Minimum periods of consultation before any dismissals take effect. In Northern Ireland these minimum periods of consultation are currently -
if 100 or more proposed redundancies, a minimum period of 90 days;
if between 20 and 99 proposed redundancies, a minimum period of 30 days.
A failure to comply with the collective consultation obligations could result in protective awards being made to the affected employees of up to 90 days' gross pay per employee.
The 'Woolworths case'
The case is about the breach of the duty to consult over mass redundancies by two businesses, Woolworths and Ethel Austin, both now insolvent. The Employment Tribunals at first instance held that the duty to collectively consult has not arisen in the stores employing (or proposing to dismiss) less than 20 employees, and that each store could be treated as an individual establishment when determining consultation obligations. It was therefore only in relation to the larger stores, those proposing to dismiss 20 or more employees, that the obligations were triggered. This meant that employees in the larger stores were awarded protective awards for the failure to consult, whereas those in the smaller stores were not.
The single issue to be determined by the EAT was whether the duty to collectively consult 'bites' when 20 employees are dismissed or when 20 are dismissed in any one establishment: a site-by-site atomised approach or a holistic approach.
What the EAT decision says
In essence the EAT has held that current UK legislation does not reflect what the EU Collective Redundancies Directive had intended. It concluded that the Directive did not intend to permit employers to opt-out of their collective consultation obligations by dividing up their workforce amongst different establishments and looking at each establishment (or the number of proposed redundancies at each) in isolation.
The EAT concluded that "the words "at one establishment" should be deleted from Section 188 as a matter of construction pursuant to our obligations to apply the Directive's purpose". The practical implication of this decision is that employers must look at the total number of employees it is contemplating making redundant across its business within the 90 day window when determining whether it must collectively consult or not.
What are the practical implications and considerations for employers based in Northern Ireland?
Although decisions of the EAT in England are not binding on the NI tribunals, they are of persuasive value. Given that the relevant NI legislation reflects the GB legislation and is also derived from the European Directive the decision is likely to be regarded as 'good law' in NI.
The practical reality of this decision for employers with multiple workplaces is that there will be greater obligations to inform and consult with appropriate representatives going forward as the threshold for triggering these obligations has been lowered. Employers with offices, sites or divisions in say Belfast, Coleraine, Portadown and Enniskillen will have to count the numbers of proposed dismissals across the business as a whole and if the number is 20+, consultation will need to be undertaken.
The timeline or project plan for the implementation of any proposed redundancies may need to be extended if the collective consultation obligations identified above are triggered.
Employers who do not recognise trade unions or an employee representative body may wish to consider putting one in place, with the authority to consult about potential collective redundancies. This should help speed up that part of the process and avoid having to start from scratch.
On a practical level, very large employes may face difficulties as they may not even realise that the obligation has been triggered if redundancies are being made in different parts of the business which are not in particularly close communication. One or two proposed redundancies at remote sites may be enough to tip the balance over to a collective situation. Employers should put in place mechanisms to ensure that HR or another responsible department has central visibility over any proposed redundancies across the company.
You may consider having a suite of basic documentation that can assist in dealing with collective redundancies 'at the ready', which can then be fine-tuned to fit the particular collective redundancy as and when it arises.
If in doubt, seek advice.
What are the practical implications and considerations for employers with operations straddling GB and NI?
If a collective redundancy situation has arisen with, for example, 3 employees in Belfast, 14 in Birmingham and 4 in London, the obligations to consult are likely to be triggered which will require some consideration and planning in relation to having appropriate representatives in each location and determining the best way to undertake the consultation itself.
Another practical headache from a planning perspective will arise if the total number of proposed redundancies is in excess of 100. In GB the minimum period of consultation in such circumstances has been reduced to 45 days. In NI, the prescribed minimum period of consultation remains at 90 days. This means that the dismissals in GB can, theoretically, take place before any notices of dismissal can be issued in NI. The Minister announced last week that as part of a consultation process in relation to employment law review in Northern Ireland he will also be considering a change of the collective consultation laws. We expect the consultation paper to be issued shortly and to close in October 2013.
You should check who the employing entity is. The EAT decision makes it clear that if an "employer" is making redundancies that the total numbers of proposed dismissals should be tallied. If the GB employer is different to the NI employer, then there may be scope to argue that NI and the GB numbers should be counted independently. There is of course no decided case on this point yet but it may be a strategy worth considering depending on the facts of the case.
What should an employer do if it has already run or commenced a redundancy process under the "old law"?
If you have recently completed a redundancy process using the old "one establishment" rules there is little that it can do, other than hope that claims don't arise. The more challenging situation is likely to be where an employer is in the middle of a redundancy process under which it thought that it did not need to collectively consult. The employer can either:
- try to start the process again (or 'tweak' the process) so as to comply with its collective redundancy obligations. Two problems spring to mind – (i) it may not be practicable or economically feasible to refresh the process if it is particularly advanced, and (ii) decisions may already have been taken in the process which will be difficult to revisit with an open mind; or
- take the risk of completing the process already underway and hope that no claims arise. This approach could be incredibly costly to an employer.
Is this all a storm in a teacup?
We don’t yet know whether the EAT's decision in the Woolworth's case will be appealed. We will let you know if an appeal is to be lodged. In the meantime however large businesses with numerous divisions, sites and locations will have to be live to these issues and to factor them in to potential change programmes and risk analyses.