Woolworths – Widening the Ambit of Collective Redundancy Consultation

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It has been reported that the UK's Employment Appeal Tribunal ("EAT") has overturned an employment tribunal decision denying protective awards to former employees of Woolworths who had worked in stores with fewer than 20 employees.

Under section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA"), an obligation to collectively consult is triggered when an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. A failure to consult can lead to a protective award of up to 90 days' gross pay for each affected employee.

Following Woolworths entering into administration in 2008, the trade unions representing the former employees claimed that Woolworths had failed to comply with its consultation obligations under TULRCA. The employment tribunal considered whether each individual Woolworths store or the Woolworths retail operation as a whole amounted to one establishment. The tribunal found that each Woolworths store was a separate establishment so the obligation to consult did not arise in those stores with fewer than 20 employees; as a result, employees at the smaller stores were not entitled to a protective award.

Although the EAT judgement has not yet been published, a press release from the claimants lawyers states that the EAT has ruled that the words "at one establishment" are to be "disregarded for the purposes of any collective redundancy involving 20 or more employees." The EAT has decided that TULRCA is incompatible with the Collective Redundancy Directive, the EU Directive upon which TULRCA is based; whilst the Directive applies (in certain circumstances) even where the dismissals are at different establishments, TULRCA requires the dismissals to be "at one establishment." In order to render the UK legislation compatible with the Directive, the EAT appears to have decided that the words "at one establishment" should be struck out from TULRCA.

Employers proposing to make large-scale redundancies will now potentially be caught by the collective consultation obligations whether the employees are based at a single site or several locations. Not only will the obligation to consult be triggered much more frequently, large employers with multiple sites will need to monitor redundancies across the business in order to ensure they are aware of when the obligation to consult has arisen. This will significantly increase costs for employers, as well as the risk of substantial protective awards for those who fail to comply with their consultation obligations. As in the Woolworths case, particular difficulties will arise in relation to buyers of insolvent businesses who may inherit a significant liability for any failure by the administrators to collectively consult on any pre-completion redundancies.