Government-sponsored changes in April that tipped the balance in favour of employers have been followed by an EAT decision in late May which is highly favourable to unions and the employees they represent.

Introduction

On 6 April, the minimum consultation period for the largest-scale redundancies (involving 100 or more employees over a 90 day period) was reduced from 90 to 45 days. In addition, further amendments to the legislation made it clear that fixed-term employees whose contracts expired at the end of their term during the relevant period did not count as redundancies for these purposes.

In late May the Employment Appeal Tribunal heard two appeals involving redundancies across a national retail operation; the case involving the collapse of the Woolworths chain of shops is the better known. The employment tribunal had denied protective awards to employees based at shops with fewer than 20 employees. On appeal the EAT decided that, despite the express wording of the legislation, these employees should receive an award as well as employees in the larger establishments. The written decision was finally published in early July.

The legal background

An employer’s obligation to consult over collective redundancies is set out in section 188 Trade Union and Labour Relations (Consolidation) Act 1992. It arises when an employer "is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less" (emphasis added).

This legislation was introduced to implement the Collective Redundancies Directive. However the Directive and the 1992 Act do not approach the calculation of the threshold in the same way. The Directive allows member states to chose between a threshold based on the relative numbers of redundancies at a particular establishment, and one based on the absolute number of redundancies across the employer’s entire operation. By adopting what in effect is a hybrid of the two (ie an absolute number but at a particular establishment) the Act arguably narrows the scope of the Directive in some circumstances.

When this point was last considered by the EAT, it felt unable to go behind the express wording of the Act, at least in circumstances where the employer was in the private sector and therefore direct reliance on the Directive was not possible. This was despite the principle of indirect effect, which obliges our courts to interpret domestic legislation in line with the underlying Directive where this is possible.

The Woolworths appeal

The employment tribunal had felt obliged to follow previous case law. It decided that each shop was a separate establishment and dismissed claims by employees based at shops with fewer than 20 employees. However the EAT said things had now moved on from 2002, when the point was last considered. It looked particularly at an EAT decision in 2009 (Coleman v Attridge Law) which extended the scope of the Disability Discrimination Act by reading in words to cover associative discrimination, even though this appeared to be precluded by the literal wording of the Act.

The EAT had a number of options to fix the problem. It chose the most radical, which was to read the relevant words of section 188 as if "at one establishment" were deleted. This approach transforms the trigger for collective redundancies from an establishment-based test, to one that applies across the whole of an employer’s operation. It follows that this decision is not specific to the facts of the case – where there was an argument that each individual shop should not have been treated as a separate establishment – but is of universal application.

The consequences

The EAT’s decision hands protective awards to almost 4,500 employees who were denied awards by the tribunal. Since both employers involved were insolvent, the extra bill is likely to be picked up by the Government. This alone would presumably justify an appeal by the Secretary of State for Business, Innovation and Skills, who has been joined to these proceedings as an interested party. Given the radical approach taken by the EAT, there also appear to be legal grounds for an appeal.

Pending guidance from the Court of Appeal, or swift Government intervention to fix the problem, employers are now faced with considerable uncertainty. It is likely that employment tribunals will prefer the later of the two conflicting EAT decisions. However a private-sector employer would have grounds for appealing an adverse decision. Public sector employers will be faced with the additional argument that their workers can rely directly on the Directive.

When deciding whether to change their approach to collective redundancies, employers will be guided by the degree of additional risk involved in sticking to an establishment-based approach in the face of this latest EAT ruling which suggests it is wrong. This will depend on the absolute numbers involved as well as the strength of union representation. Matters are complicated by the fact that collective redundancy rights can not be compromised by agreements with individual employees. Employers with all their operations on one site are unlikely to be affected by this new reading of the law.