A notable decision by the Employment Appeal Tribunal (EAT) in USDAW v Ethel Austin and others significantly extends employers' obligations to collectively consult where 20+ redundancies are proposed by a business, regardless of the number of redundancies at any one site.
The European Collective Redundancies Directive (the Directive) requires member states to implement legislation obliging employers to consult collectively with staff where significant redundancies are contemplated.
Domestically, the Trade Union and Labour Relation (Consolidation Act) 1992 (TULRCA) purports to implement the Directive - and in doing so sets out the relevant trigger for consultation as follows: "where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less" (s188 TULRCA) (emphasis added).
An employer who fails to comply with the collective consultation provisions may be subject to a protective award of up to 90 days actual gross pay for each affected employee.
In 2008 and 2010 respectively, the retail chains Woolworths and Ethel Austin went into administration. The Union of Shop, Distributive and Allied Workers (USDAW) brought claims that the employers had failed to meet the collective consultation obligations. The Employment Tribunal held that each individual store should be treated as a separate establishment, and that therefore collective consultation was only necessary at locations with more than 20 employees. Therefore, only employees who worked at stores with 20+ staff were entitled to a protective award.
As a result more than 4,400 employees from the two businesses were excluded from the payments awarded to their colleagues who happened to be based at bigger stores.
USDAW appealed the decision.
In considering the appeal, the EAT analysed the purpose of the Directive and the relevant provisions of TULRCA. The EAT held that the central aim of the Directive was to improve workers' rights. It also found that Parliament's intention had been for TULRCA to interpret the Directive correctly, notwithstanding the fact that the actual wording of the legislation was more restrictive than the Directive.
The EAT ruled that it was entitled to interpret s188 TULRCA so that it complied with the obligation of the Directive. It therefore held that the words "at one establishment" should be deleted from s188.
Consequently the employees from the smaller stores are now entitled to a protective award which, with the employers insolvent, will fall to be paid by the Secretary of State for Business, Innovation and Skills.
It is not yet clear whether the Secretary of State will appeal the decision.
This decision represents a significant development in the law on collective redundancy consultation.
As a result of the judgment, the time, cost and effort involved in managing multiple redundancies are likely to increase significantly. Employers will be required to collectively consult whenever the threshold of 20 proposed redundancies across the organisation is reached in any rolling 90-day period.
If your organisation is currently implementing, or is about to implement, redundancies across the business which are likely to trigger the 20 employee threshold, we recommend that you take urgent advice if you are not consulting collectively, or had been intending not to consult collectively.
Remember that the obligation is also triggered by reorganisations or contract change negotiations if the employer intends to terminate contracts as part of the process.
In order to ensure that this obligation is met, employers would be wise to set up company-wide processes which monitor redundancy proposals across all sites. Systems should be established which alert management when 20 or more redundancies are proposed within any 90-day period. Employers who fail to effectively monitor redundancy proposals risk facing a hefty bill should a Tribunal find that collective consultation obligations have not been met.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2013. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.
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