Employers operating in the UK should exercise caution if they are proposing redundancies, as the duty to consult collectively with appropriate representatives may be triggered even if they are making less than 20 employees redundant at any one location.
This decision represents a significant change to the law and it means that if an employer is proposing to dismiss 20 or more employees as redundant within a period of 90 days or less, irrespective of where those employees are based, then it must ensure it complies with its collective consultation obligations, or run the risk of a protective award (up to 90 days’ actual pay per affected employee) being made against it.
The joint appeals of (1) USDAW v Ethel Austin Ltd (In administration) and (2) USDAW & ors v WW 1 Realisation Ltd & ors (better known as the “Woolworths case”) came out of the demise of Ethel Austin and Woolworths, both retail businesses. In both cases significant redundancies were made when the businesses collapsed. Trade union and employee representatives brought proceedings in the Employment Tribunal claiming that the employers had failed to comply properly with their duty to consult the appropriate representatives about the proposed redundancies, as required under s.188 of TULR(C)A 1992. The claims were successful, but the Tribunals only made protective awards in respect of employees who worked at stores with 20 or more employees, on the basis that the duty to consult collectively did not apply in the smaller stores. This is because according to s.188 the statutory duty to consult collectively is only 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. In the Tribunal’s view each store constituted a single establishment and so the duty to consult only applied to those stores with 20 or more employees. The representatives challenged that decision and the EAT has now upheld their appeals.
According to the EAT, the current wording of s.188(1) of TULR(C )A 1992 does not implement properly the corresponding provisions in the EU Collective Redundancies Directive, notwithstanding very long-held practice in the UK. In its view the Directive requires the UK legislation to provide protection for employees where the number of proposed redundancies by an employer is at least 20 overall (i.e. irrespective of where they work) over a period of 90 days and not merely where the number being proposed at any one location exceeds that number. To achieve this result the EAT has said that the words “at one establishment” in s.188(1) should simply be “disregarded”, being a qualification not found in the Directive.
Easy for the EAT to say, but this decision is not good news for UK employers. It means they need to look again at how they handle any redundancies, especially those businesses contemplating redundancies across multiple sites. They can no longer assume that each site will be treated as a separate location. Take the following example: Employer A is proposing 5 redundancies at site A, 10 at site B and 10 at site C, all within a period of 90 days. Prior to this decision the employer would probably not have had to concern itself with collective consultation at all since at none of its establishments is it proposing 20 or more job losses. Going forward,
the fact that the business is proposing 20 or more redundancies overall within a period of 90 days means the collective consultation obligations will be triggered. This is likely to be extremely confusing for multi-sited employers who may need to keep a running total across their business of where changes are taking place, with a constant totting-up process, or potentially face a claim for a 90-day protective award. On the very limited bright side, this does not mean that our employer above also needs to inform and consult staff in site D where no redundancies are proposed (since then it is presumed that staff there would not be “affected”). However, if it is looking at even just one redundancy there, that will be enough to engage the collective consultation procedures for the affected staff there.
Unionised organisations will need to be particularly cautious, as the unions will be alive to this change in the law. The wide definition of “redundancy” for collective consultation purposes means that this decision will also affect dismissals following a failure to agree changes to terms and conditions across different sites.
It is not yet clear whether there will be any further appeal. The new judgment does produce some odd practical consequences, but even if the last 20-something years’ practice has genuinely been based on a mis-construction of the Directive, that will not make this ruling wrong at law.