The eagerly awaited Employment Appeal Tribunal judgment in the case of USDAW and others v WW Realisation 1 Ltd (in Liquidation) and others has been published.
The case was brought by trade union USDAW on behalf of employees working for Woolworths when the retail chain collapsed.
Although the tribunal found that the store had breached its collective redundancy consultation obligations and made protective awards in respect of affected employees, it excluded those who worked in stores where fewer than 20 employees were dismissed. As Woolworths subsequently went into liquidation, the protective awards made were paid by the Secretary of State.
USDAW appealed arguing that protective awards should have been made in respect of all employees regardless of the size of the stores in which they worked.
The European Collective Redundancy Directive 98/59 EC (the Directive) aims to protect workers in the event of collective redundancies. Member States were given two options for implementation of the Directive in respect of the meaning of 'collective redundancies'.
The UK chose the second option:
'...where,.the number of redundancies is.over a period of 90 days, at least 20 whatever the number of workers normally employed in the establishments in question'.
Many other European countries chose the alternative option which considers the number of redundancies over a 30-day period and requires a consideration of the overall number of workers employed in an establishment in order to calculate whether the requirement to consult collectively has been triggered.
Cases that have previously considered the meaning of 'establishment' at European level have concerned jurisdictions which implemented the first option not the second (UK) option.
Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) implements the Directive in the UK and imposes the obligation on an employer to consult collectively where there are mass redundancies.
However, under the domestic legislation this is stated to apply only where an employer is proposing to dismiss as redundant 20 or more employees 'at one establishment' within a period of 90 days or less.
The EAT decision
Although judges in previous cases have expressed some misgivings as to whether TULRCA properly implemented the Directive none has previously made the leap that the Employment Appeal Tribunal (EAT) was willing to make in this case.
Drawing authority from more recent cases on the interpretation of legislation, it held that the words 'at one establishment' should be deleted from section 188 TULRCA in order to give effect to the tribunal's obligation to take a purposive approach to the aim of the Directive.
The practical effect
Although this decision may come as a shock to employers, they will now have to collectively consult whenever they reach 20 proposed redundancy dismissals, regardless of the location of those dismissals.
This is likely to involve some significant change of practice, particularly in the retail sector where collective redundancy obligations may have been avoided in the past by keeping redundancies below the threshold in each store.
Employers who are proposing to dismiss fewer than 20 employees in any 90-day period will not be affected. Keeping redundancy numbers low, however, must be balanced against the need to make more significant cost savings at a faster pace.
Employers who do not recognise trade unions or have any other employee representative body may consider putting one in place with the authority to be consulted about collective redundancies.
The employer will then not have to spend time electing representatives each time redundancy consultation is required and can start the clock running on the consultation period without any delay for election of representatives.
For really large organisations there will be the practical challenge of knowing when the threshold is reached, as just one or two redundancies in lots of disparate locations could trigger the duty to consult collectively.
The Secretary of State refused to take part in this appeal, even though the Government will now have to pay out additional protective awards to ex-Woolworths staff. A further appeal therefore seems unlikely.
It remains to be seen if the concept of 'establishment' will still be relevant when it comes to an employer's obligation to submit an HR1 form with details of collective redundancies to the Secretary of State.
The information contained in the HR1 form is intended to alert the relevant Job Centre that there are going to be a lot of redundancies in a particular location.
Where there are fewer than 20 redundancies spread over numerous locations, it seems unlikely that the Insolvency Service will wish (or be able) to contact each Job Centre in each location and guidance from them on this issue would be welcome.