Woolworths case brings crucial change in collective redundancy law

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The way employers decide whether or not they are obliged to consult collectively with employees over dismissals has potentially significantly changed according to a recent decision of the Employment Appeal Tribunal (EAT), and is from now on likely be determined by the number of redundancies across an employer's business rather than at, for example, individual sites.

What did the EAT decide?

A number of ex-employees from the smaller stores of Woolworths and Ethel Austin brought a joined appeal alleging that they should have been collectively consulted over their redundancies when their employers went into administration.

This had not taken place because the obligation to consult collectively is triggered "where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less".

It was thought that although the employer was making thousands of redundancies nationally, each smaller store was "one establishment" with less than 20 employees and therefore collective consultation was not required.

The EAT has now ruled that the words "at one establishment" should be deleted from the collective redundancy legislation (Trade Union and Labour Relations (Consolidation) Act 1992: "TULRCA").

How can the EAT delete words from legislation, and why now?

The EAT has decided that it can do this because the EU Directive which the UK legislation implements does not limit the 20-worker threshold to "one establishment". The Directive's reference to "establishments" is not restrictive, and it is intended to improve workers' rights (whereas the UK's limitation clearly reduces them - in this case leaving some 4,400 employees with no remedy).

In the UK the words "at one establishment" (a legacy from a previous version of the law) weren't even considered by Parliament when TULRCA was brought into line with the Directive several years ago. Therefore, according to the EAT, it cannot have been an intentional part of the provisions. On the contrary, Parliament clearly intended to implement the Directive correctly at the time.

Why now? A previous case in 2002 had raised this very argument but it was rejected then by the EAT because disregarding the words "at one establishment" was seen as being too much of a strain on "interpreting" TULRCA when the wording was clear.

The EAT has now taken the view that cases like Coleman v Attridge Law have shown how UK laws may be interpreted so that they comply with European Directives, even if this means changing, adding or deleting words.

What's the impact of the decision?

This decision could well be appealed, or Parliament could step in to change this interpretation. Until that happens, the decision will mean that:

  • Employers have to look at the proposed number of redundancies across their business within a period of 90 days to determine whether employees should be collectively consulted (ie with a recognised trade union or employee representatives): it will no longer be restricted to redundancies proposed, for example, at a particular site
  • The same will need to be done when terminating contracts of 20 or more employees to change terms and conditions
  • HR departments and businesses will have to ensure communication between sites about dismissals is up to scratch: just a handful of proposed dismissals which, across several sites, amount to 20 or more will trigger the obligation
  • Small-scale redundancies could take longer than previously, although the recently reduced consultation timeframes will make this less onerous than it might have been
  • Recent dismissals/redundancies could be affected despite this decision only being published this month.

It is not known whether Woolworths' administrators or BIS, who will pick up the tab for some 4,400 protective awards (of 60 or 90 days' pay per employee), will appeal. The chances of this succeeding are reduced by the fact that neither appeared in the EAT to contest the arguments.