Two important decisions from the UK Employment Appeals Tribunal and from an Employment Tribunal in Northern Ireland have had a significant impact on the law relating to collective redundancies in the UK.
On the insolvency of the Woolworths chain of stores in the UK the employees were made redundant by the administrators without any consultation. The same thing happened with the employees of the Ethel Austin chain. Claims were brought by the employees for breach of the obligation to conduct collective consultation in advance of making redundancies.
That obligation arises under the EU Collective Redundancies Directive. This was implemented in the UK in the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). TULRCA provides that the obligation to consult collectively (i.e. with either trade unions or elected employee representatives) arises where 20 or more employees are to be made redundant "in one establishment" within a period of 90 days. UK law has regarded “establishment” as meaning distinct parts of the organisation as well as geographical locations and, applying that to the particular situation the Employment Tribunal found in favour of those staff who worked in branches where there were 20 or more employees but made no award to those who worked in smaller stores. That left 3,233 Woolworth employees without any compensation for failure to collectively consult and 1,210 in Ethel Austin.
The Employment Appeal Tribunal overturned this decision. It found that UK law was incompatible with EU law in its use of the concept of "establishment" and that the obligation to consult should arise where 20 or more employees are being made redundant in the organisation or business as a whole within the 90 day period and not in individual geographical locations.
The UK Government has indicated its intention to appeal this decision and that is likely to be heard early in the New Year. In the meantime an Industrial Tribunal in Northern Ireland has referred a number of questions arising from a similar case to the European Court of Justice. One of these is whether the obligation to consult arises where 20+ redundancies are proposed in one establishment or across the whole of the employer’s business. We will report further on these cases as they progress.
As the law presently stands – until either it is changed by the Court of Appeal or by the ECJ - employers must consult as soon as 20 or more redundancies are planned in a period of 90 days even if these are across a number of establishments.
This will be particularly relevant for employers with multi-site operations – for example, retailers and the hospitality industry. The risk of not doing so can be high. A protective award of three months pay may be claimed on behalf of those employees in respect of whom there has been no consultation and the normal approach is for the full amount to be awarded and only reduced if the employer can show good reasons why it was unable to comply. In the case of Woolworths’ administrators this will mean a liability well into seven figures.
USDAW v Ethel Austin Ltd (in administration) and another case UKEAT/0547/12, 0548/112
Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.
Circular 230 disclosure
To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.