In a judgment with significant ramifications for employers in the UK, the Employment Appeal Tribunal has held that UK legislation on collective redundancy consultation does not comply with EU law. In the conjoined appeals of Usdaw -v -Woolworths and Ethel Austin, the EAT has found that it is not lawful for UK legislation to restrict an employer's collective consultation obligations to those redundancy programmes which involve 20 or more employees "at one establishment". The effect of the judgment is that an employer will need to collectively consult whenever it proposes to dismiss as redundant 20 or more employees within a 90 day period, irrespective of where those employees are located.
S188 of the Trade Union and Labour Relations Consolidation Act 1992 requires an employer to consult collectively where an employer proposes to dismiss by reason of redundancy 20 or more employees "at one establishment" within a 90 day period.
Consultation must begin "in good time" and is subject in any event to the following timescales before the dismissals take effect:
- at least 30 days where between 20 and 99 employees are to be dismissed; and
- at least 45 days where 100 or more employees are to be dismissed.
The concept of "establishment" is key when deciding whether the collective consultation obligations have been triggered. There is, however, no definition, and the UK government said clearly in its response to consultation on changes to the collective redundancy regime earlier this year that it was not going to introduce one.
S188 purportedly implements the requirements of the Collective Redundancies Directive. The Directive gives Member States the option of choosing 1 of 2 definitions of "collective redundancy" for consultation purposes. The first option is linked to the numbers or percentage of the workforce to be dismissed over the relevant period within an establishment of a particular size. The second option, chosen by the UK and subsequently transposed into the language of S188, is:
- "the dismissal, over a period of 90 days, of at least 20 workers, whatever the number of workers normally employed in the establishments in question", (Article 1(1)(a)(ii)).
S188 does not replicate this wording. This discrepancy was the key issue in the Woolworths case.
In 2008 and 2010 the retail chains of Woolworths plc and Ethel Austin went into liquidation. Several thousandemployees lost their jobs as a result. The union representatives brought claims for a failure by the administrators to inform and consult collectively on the redundancies. The Employment Tribunal upheld the claimsand made maximum protective awards of 90 days' pay in respect of the Austin employees, and 60 days' pay forthe Woolworths employees. As both employers were inadministration, the payments were made from the NationalInsurance Fund.
When assessing who was entitled to those payments, theTribunal took the view that each individual storeconstituted an "establishment", and that therefore the administrators had not been required to inform orconsult at those "establishments" where fewer than 20employees were based. The effect of the Tribunal's judgment was to exclude a total of some 4,400 workersfrom entitlement to a protective award. The union appealed.
Employment Appeal Tribunal
Neither the administrators nor the Insolvency Service for the government appeared at the EAT. The result was that legal arguments were put forward only on behalf of the union/employees. This may account, at least in part, for the bold decision in the case.
The EAT agreed with the union that the wording of S188 differed in significant respects to the wording of the Directive. In particular, the second option in the Directive simply required employers to collectively consult as soon as 20 employees were to be made redundant within the relevant period in "whatever" establishment they worked. This was consistent with the policy objective of ensuring that the obligation to consult is as wide as possible. The limitation in S188 to dismissals "at one establishment" was therefore more restrictive than the Directive.
The issue then was whether the EAT could give S188 a purposive interpretation, so as to be compliant with the EU Directive. In MSF -v -Refuge Assurance, 2002, an earlier EAT had held that S188 was so different to the Directive as to be "irremediable by construction," such that all the EAT felt it could do was to apply a "straightforward construction of the language". Similarly, in the recent case of Renfrewshire Council -v -Educational Institute of Scotland, 2013, the EAT expressed the view that there was "force" in the argument that S188 was not compatible with the Directive but felt bound to follow the approach in MSF.
In Woolworths, the EAT did not feel so constrained. The EAT relied on Ghaidan -v- Godin - Mendoza, 2004, where the House of Lords held that words could be added or taken away from domestic legislation where this was to "comply with higher purposes".
Furthermore, a review of Hansard revealed that the limitation of collective consultation obligations to "one establishment" had not featured in the government debates upon implementation of the current S188. By contrast, the clear intention of Parliament had been to "implement the Directive correctly." The EAT was satisfied that the government had not been entitled, and indeed had not intended, to dilute the protection offered to employees by the Directive.
The EAT held that the authorities had "moved on" since MSF, and that it was entitled to interpret S188 so as to be compliant with the Directive.
The EAT went on to find that deletion of the words "at one establishment" from s188 achieved the necessary result "clearly and simply".
Has the law been changed?
The result of the EAT's judgment in the Woolworths case is that there are now conflicting EAT decisions on how S188 is to be interpreted. Arguably, the Woolworths judgment is the most authoritative, being not just the most recent judgment, but because the EAT expressly considered, and rejected, the approach taken in earlier cases.
However, and no doubt given the importance of the issues in the case, the UK government has lodged an appeal to the Court of Appeal. It is possible that the Court of Appeal will find that the earlier cases were correct, particularly with the benefit of full and reasoned arguments by both parties. The Woolworths judgment could be attacked either on the basis that the EAT went beyond its powers in re-writing S188 and/or that the wide interpretation given by the EAT to the meaning of the 2nd option in the Directive is wrong. There has been no ruling to date on what the wording in option 2 actually means. However, in Lyttle -v -Bluebird UK Bidco 2 Ltd, an industrial tribunal in Northern Ireland has recently referred a number of questions on the correct interpretation of "establishment" to the ECJ, including how the term as it appears in option 2 should be interpreted. The ECJ ruling should therefore provide welcome clarity.
Where does this leave employers?
In what will amount to a significant change to current practice for many employers in the UK, the EAT's judgment requires employers, at least for the time being, to consult collectively where 20 or more employees are to be made redundant within a 90 day period across the business, irrespective of where the employees work. The lack of any argument on "establishment" may of course mean that the collective consultation obligations are triggered in circumstances where they would not previously have been triggered at all and/or that the minimum 45 day period, (as opposed to 30 days), is triggered more frequently. Employers can take some comfort, at least, that it is no longer a 90 day period which would be triggered for larger redundancy programmes, although the maximum protective award for a failure to inform and consult remains at 90 days' pay.
The judgment will impact not just present and future collective redundancy programmes, but also those recently completed. Employers who did not consult with employees across all establishments in reliance on S188, can probably do little at this stage other than wait to see whether claims are submitted. Protective award claims must be submitted within 3 months of the last dismissal taking effect, (subject to a Tribunal's discretion to admit late claims). It is unlikely to be a defence for employers to argue that the lack of consultation flowed from a legitimate approach to the "establishment" issue which was in line with case law and/or government guidance.
The EAT's judgment in Woolworths represents a significant shift in the law in the UK on collective redundancy consultation.