USDAW v Ethel Austin Ltd (in Administration) and another case2

The decision in the “Woolworths” case has changed the law on collective redundancy consultation.

As you know, the obligation to consult arises if an employer is proposing to dismiss 20 or more employees for redundancy over 90 day period - s. 188 of the Trade Union & Labour Relations (Consolidation) Act 1992 (TULCRA). The relevant wording provides that the obligation to consult collectively is triggered:

“Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days.”

Since 2002, there have been various arguments that TULCRA failed to implement correctly the European Collective Redundancies Directive. However, despite these arguments the UK courts continued, when assessing whether the obligation to consult arose, to place an emphasis on the words “at one establishment”. Therefore, the consensus was that employers only needed to count redundancies at each establishment and not redundancies across the whole of the business. So for example, in retail where there are multiple shops, it was only necessary to look at the number of “at risk” employees on a shop-by-shop basis.

The Woolworths case turns this approach on its head. Instead, the Employment Appeal Tribunal (EAT) said that employers must calculate the figure by assessing the number of employees at risk across all of its businesses.

The EAT said that the test does not require an assessment of employees at risk, on an establishment-by-establishment basis; rather the number should be calculated by ignoring the words “at one establishment” and instead assessing the number of employees across the whole of the employer’s business at all establishments. The EAT was unequivocal in its view and despite the apparent conflict, chose not to refer the issue back to the European Court of Justice (ECJ). Despite the EAT’s decision there is still some ambiguity and doubt as to what both the UK Parliament and European Directive intended. Neither is totally clear as to whether the obligation is assessed by reference to each establishment or across all establishments. The good news is that the Northern Irish Tribunal has referred the matter to the ECJ for a ruling (Lyttle and ors v Bluebird UK Bidco 2 Ltd).

Implications for Employers

The RPC employment group has been working with HR teams to digest the consequences of the Woolworths decision from an operational perspective. Under current law (as interpreted by the EAT in the Woolworths case) employers have to look at dismissals across the whole of their business and not on a site by site basis. They could be brave and hope that Europe (when looking at the Northern Irish reference case) confirms that the historic interpretation was correct. However, this outcome is uncertain. Therefore, the best approach is to plan for the worst, and hope for the best. The EAT decision creates real practical difficulties when working in multi-site businesses. The issue is further complicated because (for the purposes of collective consultation) employers also need to take into account:

  •  Expiry of fixed term contracts;
  • Dismissals to bring about variations to terms and conditions of employment.

Internal HR processes will need to be ever more sophisticated to keep track of different categories of qualifying “at risk” employees. And even on the actual consultation itself there will be practical challenges. By way of example:

  • If the redundancies are at different and geographically distant sites, there may be little common interest between the groups of affected at risk employees. Does each group (irrespective of the size of that group) require its own representative(s) so that they are properly represented? Do these representatives have to receive the same communication because they’re part of the same consultation exercise?
  • To avoid continual election processes is it possible to have a standing elected body which covers all employees?

For employers in the middle of on-going consultation, some comfort will be gained from the fact that (when determining the number of employees who are to be dismissed for redundancy) an employer can discount those employees who are already subject to consultation.