A potentially very important judgement of the Employment Appeal Tribunal (the "EAT") has been made in USDAW and others v WW Realisation 1 Ltd which will have significant ramifications for employers.
This case was brought by a Trade Union on behalf of former staff who were made redundant when Woolworths went into administration. It was argued on behalf of the staff that they were due a protective award because there was a failure to consult with the recognised Trade Unions and employee representatives regarding the redundancies, as required by The Trade Union Labour Relations (Consolidation) Act 1992 (the "TULRA"). This section states that 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. 30 days consultation is required before the first dismissal takes effect if it is proposed to make between 20 to 99 employees redundant from one establishment. 45 days consultation is required if it is proposed to make 100 or more employees redundant from one establishment.
If an employer fails to comply with this requirement an Employment Tribunal may make a protective award of up to 90 days gross pay per affected employee. Obviously this can be a very significant sum due to the numbers involved.
The main issue in dispute in the Woolworths case was the meaning of "one establishment".
The Employment Tribunal held that each Woolworths' store constituted a single establishment and therefore the duty under section 188(1) of the TULRA was not triggered in stores who employed fewer than 20 employees. It was argued by the Trade Union and employee representatives that the whole of Woolworths' retail operations nationwide should be aggregated to constitute a single establishment. As such their argument was that all Woolworths' employees should have been collectively consulted and therefore, because they were not, they all should be entitled to a protective award. The Employment Tribunal disagreed and believed that their conclusion was consistent with EU and domestic case law; and that, importantly, each store was a separate establishment.
It is important to note that section 188(1) of TULRA is designed to implement the European Collective Redundancies Directive (the "Directive") and it has been identified in the past that there is an anomaly between section 188(1) and the Directive. Essentially the Directive provides a number of options for individual EU states to comply with the obligations under it and the UK appear to have mixed a two of these options together in section 188(1). One option under the Directive is that collective consultation will be required where there is a "dismissal, over a period of 90 days, of at least 20 workers, whatever the number of workers normally employed in the establishments in question", section 188(1) largely mirrors this option except that the option in the Directive clearly refers to plural establishments. It is in fact the other option in the EU Directive which refers to "one establishment".
Although the full judgment is still awaited the EAT in USDAW and others v WW Realisation 1 Ltd appear to have decided that, due to the EU Directive, the words "one establishment" are to be disregarded where 20 or more employees are being made redundant. A press release from the lawyers representing the Union states that the EAT "have ruled that the words 'at one establishment' are here and after to be disregarded for the purposes of any collective redundancy involving more than 20 employees, meaning that once it is proposed that more than 20 employees in a single business are to be made redundant, their location becomes irrelevant".
It is very likely that this decision will be appealed. However, for the time being this will have a significant impact on employers in redundancy situations as the duty under section 188(1) of TULRA will be triggered where it is proposed to make 20 or more employees redundant across a single business over a 90 day period.
The practical options for employers include:-
- carry on as before (i.e. only consult where the 20 or more proposed redundancies are at one establishment) in the hope that the decision is successfully appealed (there is obviously a significant degree of risk with such a course of action - not just having regard to the possibility of a significant claim being raised but from a criminal liability perspective also as it is an offence to fail to notify BIS of a collective consultation situation);
- consult with trade unions each time there is a proposed redundancy and, in addition, where employees are not represented by a trade union elect a standing body of employee representatives to consult with each time there is a proposed redundancy (this is likely to be attractive to larger complex organisations where it is difficult to keep tabs on the exact number of proposed redundancies at any given time);
- ensure systems are in place to keep an accurate note of proposed redundancies at any given time then collectively consult when the number of proposed redundancies across the business in a 90 day period reaches 20.
It is strongly recommended that employers undertaking redundancy exercises where it is proposed to make 20 or more employees redundant take legal advice prior to taking any course of action.