Establishment disestablished: numbers alone to determine when collective redundancy consultation is triggered

Further to our article of 17 June 2013 on recent developments in collective redundancy law, the Employment Appeal Tribunal’s (EAT) judgment has been published in the case of Usdaw and others v WW Realisation 1 Limited (in Liquidation) (the Woolworths case).

Woolworths, a retail giant employing over 27,000 employees across 815 UK stores went into administration in November 2008 after succumbing to a severe financial crisis that would eventually see one of the UK’s best-known names disappear from the high street. A practical consequence of Woolworth’s collapse was the breach of duty to consult with elected employee representatives over redundancy after all jobs were lost. The failure to comply with consultation entitles dismissed employees to a protective award but in the Woolworths case some 3,233 staff who had worked in stores with fewer than 20 employees were denied protective awards in a tribunal claim led by unions Usdaw and Unite.

The tribunal held that each store was a separate “establishment” for the purposes of S188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRA) and since legislation required the dismissals to be “at one establishment” Woolworth were not obliged to consult at stores with fewer than 20 employees. Staff employed at large sites eventually received protective awards in the collective sum of £67 million.

The judgment was appealed by Usdaw seeking to obtain compensation for those that had missed out. The crux of the matter was whether the site-by-site interpretation of the meaning of ‘establishment’ for S188 TULRA was correct or whether the number of employees should be aggregated where a company operates across multiple sites.

Usdaw’s appeal succeeded, with the ETA adopting a ‘holistic’ approach to collective redundancy law in order to reflect the core objective of EU redundancy law: protecting workers’ rights. The ruling strikes the use of the words “the establishment” from the law, which the EAT held were not intended to be construed in any particular way. In this respect, the new ruling will serve to simplify legislation on collective redundancy by eliminating the scope to argue about the correct interpretation of “the establishment”.

From employers’ perspective, however, the direct and measurable consequences of the ruling will be more pervasive than a simplification of legislative wording. Firms spread across a number of smaller sites not previously affected by collective redundancy requirements will now have to find ways of keeping track of dismissals that may or may not be redundancy related. The same is true for large companies who will struggle to avoid being trapped by consultation obligations where reductions are planned by separate departments in different locations. Ironically, it has also been argued that the ruling could end up cutting more jobs than it will save by putting off potential buyers of ailing businesses like Woolworths who may risk inheriting liability in cases where the previous administration failed to carry our collective consultation.

Please contact:

Emmanuelle Ries - Partner

DD +44 (0)20 7553 9938

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