The Employment Appeal Tribunal (EAT) is reported to have handed down a decision, in litigation that resulted from the 2008 closure of Woolworths, which may mean a radical change to the law on collective redundancy consultation.
What Has Happened?
When a UK employer proposes to dismiss as redundant 20 or more employees, within a period of 90 days or less, it is required to collectively consult representatives of those affected prior to implementing its proposal. Failure to do so can lead to the employer being required to pay up to 90 days’ pay to each affected employee.
This obligation arises out of the European Collective Redundancies Directive (the Directive). In implementing the Directive, the UK Government stipulated that the obligation would only be triggered if the proposed redundancies involved employees who all worked “at one establishment” within the employer’s organisation. UK employers have therefore relied on this for many years as a means of avoiding the obligation to collectively consult when redundancies are proposed across different locations.
The EAT in the Woolworths case is reported to have held that employers must now collectively consult when they are proposing to dismiss 20 or more employees as redundant, anywhere in their UK business, within a period of 90 days or less. If this is right, location will become irrelevant and employers will find themselves required to collectively consult more frequently or face the consequences.
What Does This Mean for Employers?
It should be stressed that the judgment has not yet been published. It is expected to be published within the next few weeks and, when it is, it may transpire to be more nuanced than is currently being reported. It is also highly likely to be appealed.
If, however, reports of the judgment are accurate, it will bring about a significant change in UK collective redundancy practice. Employers will, in future, be far more likely to find themselves triggering the obligation to collectively consult if they have multiple business units, located across multiple sites, which are independently seeking to rationalise, integrate functions or reduce headcount.
This will make redundancy exercises more protracted and expensive for employers to implement lawfully. Employers will also need to keep an even closer eye on the number of redundancies being proposed across their entire organisation so they know when the trigger point has been reached. Crucially, this will affect redundancies that are already proposed and processes that are underway.
We will, of course, provide a full update once the judgment has been published. In the meantime, please contact your usual McDermott lawyer or Sharon Tan if you would like to discuss the potential impact of this judgment for any pending or on-going redundancy exercises.