Major Change in Collective Redundancy Consultation

 

The Employment Appeal Tribunal has recently passed judgment in the case of Usdaw v Ethel Austin Ltd (in administration) and another, which has important ramifications for employers considering redundancy exercises involving 20 or more employees.

Known more commonly as the ‘Woolworths’ case, the Employment Appeal Tribunal (EAT) has held that the duty to consult over collective redundancies is triggered where an employer is proposing redundancies of 20 or more employees within 90 days, irrespective of where the employees work.

Prior to this decision, it had become accepted practice in the UK that each work location was treated as ‘one establishment’, so that the duty to consult on collective redundancies would only be triggered if 20 or more employees were made redundant at one location.

The liquidation of Woolworths and Ethel Austin in 2008 and 2010 respectively, resulted in the loss of several thousand jobs. The trade unions brought a claim against the administrators in the Employment Tribunal for failing their duties under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (which implemented the EU Collective Redundancies Directive). In both cases, only employees in the larger stores (i.e. 20 or more employees) were consulted. In accordance with established practice, the Employment Tribunal held that each individual store was a discrete “establishment” for the purposes of Section 188 and therefore only awarded protective awards to those working in the larger stores.

The EAT, hearing both appeals together, found that an employer had no right effectively to ‘opt-out’ of collective consultation under the EU Directive because their employees were scattered throughout different establishments in the UK, and that the employer should have consulted with all employees, not just those from the larger stores.

The EAT felt that the existing interpretation of Section 188 did not give effect to the true intention of the Directive, and as such, the words ‘at one establishment’ should be removed. Consequently, the duty to consult over collective redundancies will arise where 20 or more employees are to be dismissed, irrespective of where they work. The outcome of these cases was that all employees from the smaller stores (some 4,000 employees in total) became entitled to a protective award.

Impact

Clearly this case has huge ramifications for employers making collective redundancies who will be well advised to ensure full consultation with all employees, irrespective of the number affected at any one location.

If you have any questions on how this decision may affect your business, please contact Adele Martins on 0207 317 6719 or at [email protected] or Susan Thompson on 0207 317 6750 or at [email protected].