Collective redundancy consultation, the legacy of Woolworths

Posted 02/07/2013

Following the liquidation of the retail chain Woolworths, several thousand jobs were lost. The recognised trade unions of the employees brought claims alleging that the administrators had failed to comply with their duties under s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992.

One such duty requires an employer to collectively consult where it is proposing to dismiss as redundant 20 or more employees “at one establishment”. The Woolworths administrators had treated each store as a discrete “establishment” for the purposes of complying with s.188 and did not collectively consult at any store with fewer than 20 employees accordingly. This was generally regarded as accepted practice based on two decades of precedent and guidance, including guidance issued by ACAS (Advisory, Conciliation and Arbitration Service) as recently as April 2013, in which “establishment” is defined as an individual unit to which an employee is assigned.The unions successfully argued in the Employment Appeal Tribunal (EAT) that the construction of s.188 was contrary to the EU Collective Redundancies Directive from which it was derived. The EAT held that s.188 is more restrictive than the Directive itself and that the words “at one establishment” should be deleted. This would mean that s.188 imposes collective redundancy requirements whenever an employer contemplates dismissing 20 or more employees within 90 days on grounds of redundancy, irrespective of the number of “establishments” at which they are located.

For the Woolworths employees, this meant that those in any store where there had been fewer than 20 in total, were entitled to receive the protective award for the failure to carry out collective consultation.It is unclear whether the matter will be taken to the Court of Appeal, however, in the meantime this decision is likely to be extremely unpopular with employers. New legislation was introduced in April 2013 which reduced the period of consultation where 100 or more employees are to be dismissed, from 90 days to 45 days. This was seen as a positive move for employers. The latest decision on the Woolworths case, however, comes as a huge blow and employers now need to err on the side of caution when embarking on any such exercise, particularly in a unionised environment where a challenge is more likely to be forthcoming.

Where an exercise is already part underway it may be prudent to take stock and even start from scratch if the new threshold has not been applied.In short, for the time being at least and pending any appeal, if employers are undertaking any redundancy exercise involving 20 or more employees across the business, even if at different locations, a collective consultation exercise ought to be undertaken to avoid falling foul of this development and risking a protective award of up to 90 days pay (gross) for each affected employee.

For further information and advice, please contact our Employment Team.