A very important judgement of the EAT has been made in USDAW and others v WW Realisation 1 Ltd and others (Woolworths' case) which will have significant ramifications for employers.
Section 188(1) of The Trade Union Labour Relations (Consolidation) Act 1992 (the "TULRA") obliges employers 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. Consultation must begin a certain number of days before the proposed redundancies are made.
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 of employees involved.
The main issue in dispute in the Woolworths case was the meaning of "one establishment".
It was argued by the Trade Union and employee representatives, who brought the case on behalf of Woolworths' employees, 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 should all be entitled to a protective award. However, 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 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 the two are not entirely compatible.
The EAT have decided that, due to the actual wording of the EU Directive, the words "one establishment" require to be disregarded where 20 or more employees are being made redundant. Essentially the EAT took a purposive interpretation of section 188(1) to ensure its compatibility with EU law. The result is that the words 'at one establishment' are 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 track of 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.
Read the full judgement of the EAT here.