A landmark ruling of the Employment Appeal Tribunal (EAT) in USDAW and others v WW Realisation 1 Ltd (in Liquidation) and another (a case arising out of the Woolworths insolvency in 2008) is likely to have significant implications for employers making large scale redundancies.
Where an employer proposes to make 20 or more redundancies over a period of 90 days, it will now have to consult collectively with employee representatives, irrespective of whether those employees are based at one large site or over several locations. This represents a significant change to the current “establishment” based approach to the collective redundancy consultation rules and will mean employers will need to coordinate and monitor redundancies across their businesses to ensure the consultation provisions are not inadvertently breached.
UK law provides that an employer who is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less must consult employee representatives about those dismissals. Failure to do so can result in a protective award of up to 90 days’ gross pay per affected employee.
After Woolworths went into administration in 2008, trade unions representing the Woolworths employees complained to the Employment Tribunal that Woolworths had failed to comply with its obligations to consult the employees under UK collective redundancy consultation law.
The Employment Tribunal found that each Woolworths store was a separate establishment, so the obligation to consult collectively only arose in larger stores where 20 or more employees were to be made redundant. The result was employees in larger stores received large protective awards, whereas their colleagues in smaller stores received nothing.
The Tribunal’s decision was appealed to the Employment Appeal Tribunal and, according to a press release issued by the union’s lawyers, the EAT has ruled that the words “at one establishment” in the legislation are to be “disregarded” for the purposes of any collective redundancy involving 20 or more employees. The EAT considered this necessary in order for UK legislation to properly reflect EU law.
The actual judgment of the EAT is not due to be published for around 3 weeks, but we understand from independent sources that the union’s lawyers press release in relation to the judgment is correct. This means that the “new law” has immediate effect, so any employers who are proposing to dismiss as redundant 20 or more employees, irrespective of whether those dismissals take place at a single company site or across several sites, will now be potentially caught by the collective redundancy obligations.
Although the meaning of “establishment” has proved difficult to interpret, it would now seem that large multi-site employers will no longer be able to fall back on the establishment test at all in order to avoid triggering the collective redundancy consultation rules. It will therefore be necessary for all large employers who have a number of branches or offices across the UK to ensure that they have a co-ordinated and centralised oversight which keeps records on how many dismissals which fall under the ambit of redundancy consultation are proposed across the company at any one time. Failure to do this could mean that the company inadvertently breaches the collective redundancy obligations, therefore risking protective awards being made against it.
The result is more administration and more risk for larger UK employers - both in terms of the monitoring which will be required, and also the fact that collective redundancy consultation will be required more frequently. We do not know at this stage if the decision will be appealed but in light of the commercially and pragmatically difficult position in which large employers will now find themselves, we consider it highly likely that the Government will intervene.