By way of background, the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) provides that an employer must collectively consult where it proposes to dismiss as redundant 20 or more employees at a one establishment. If it fails to do so each employee may be entitled to a protective award of up to 90 days gross pay.
This limitation meant that often collective consultation requirements were not triggered where (for example) a business had a chain of shops and less than 20 employees were made redundant in each individual shop. Consultation must begin “in good time” however, certain minimum time periods apply depending on the number of redundancies proposed. Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect. For less than 100 redundancies, the minimum period is 30 days.
There is a limited “special circumstances” defence available for employers who fail to collectively consult, but case law has established that insolvency or entering into administration, in and of itself, is not “special circumstances”. This can seem incredibly harsh where a business is in dire financial circumstances and decisions need to be made quickly.
TULRCA is derived from Article 1(1) (a) of the European Collective Redundancies Directive (Directive 98/59/EC). The Directive refers to two possible definitions of collective redundancy one of which is: the dismissal, over a period of 90 days, of at least 20 workers, whatever the number of workers normally employed in the establishments in question.
In, USDAW & Wilson v WW Realisation 1 Ltd & Ethel Austin Limited & others, WW Realisation traded as "Woolworths".
Woolworths went into administration and made multiple redundancies without consultation. The Employment Tribunal made protective awards to a number of employees. However they excluded from the awards those made redundant in shops where fewer than 20 workers were dismissed. The excluded employees appealed.
On appeal, the Employment Appeal Tribunal ruled that TULRCA was inconsistent with the Directive and the limitation of ‘one establishment’ when carrying out consultations should be disregarded. This meant that when looking at collective consultation requirements, the whole business needed to be looked at, not just the individual locations where the employees were based. The consequence of this decision was a protective award to hundreds of redundant employees estimated to have cost in excess of £4 million and huge criticism levelled at the Liquidators, who had failed to ensure that proper consultation took place. The decision was something of a surprise to Employment Lawyers and HR professionals alike as it departed from previous practice.
Unsurprisingly, the Liquidators for the Woolworths and Ethel Austin retail chains, with the UK government intervening, appealed to the Court of Appeal who referred the 'establishment' question to the CJEU.
In February 2015, the Advocate General (AG) gave an opinion on the matter and stated that an ‘establishment’ – for the purposes of working out if collective consultation requirements are triggered – is the unit to which the redundant employees were assigned to carry out their duties. He went on to say that this was a matter for the national courts to decide based on the facts. However, the AG did not rule out the possibility that, on the facts, several shops within one shopping centre could still be viewed as a single unit. Nevertheless, his decision was more aligned to the pre “Woolworths” position and a huge relief for employers.
The CJEU has now delivered its opinion and has confirmed that it is in agreement with the AG. An “establishment” is the entity to which the workers made redundant are assigned to carry out their duties, for the purposes of determining whether collective consultation requirements are triggered. In this case, if each store is considered a separate establishment and fewer than 20 redundancies were made at each store, then the collective consultation requirements will not be triggered in respect of those employees.
What is an “establishment” will be fact sensitive and matters such as whether or not the store is a distinct entity and has permanence and stability will be relevant as will matters such as whether the employees were assigned to work in one particular store, rather than across the entire business. So whilst the decision will undoubtedly be welcome by businesses and insolvency practitioners alike, collective consultation still remains one of the trickier parts of the law.
More details about the court decision are available here.
This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained.