Woolly Legislation

For the last two years there has been uncertainty for employers as to what their obligations are when considering making 20 or more redundancies within their business. Up until May 2013, the position was relatively straight forward – if an employer was proposing to make 20 or more employees redundant at one site (or “establishment”) in a 90 day period, there was a requirement to collectively consult with those employees for a period of at least 30 days before terminating employment. Failure to do this could result in damages of up to 13 weeks’ pay being awarded for each employee, known as a “protective award”.

The case of USDAW & Wilson v Woolworths & Ethel Austin changed this, temporarily at least. Woolworths and Ethel Austin were high street retailers with stores throughout the UK, both of whom went into administration. This led to the closure of all their stores, leading to redundancies for which no formal consultation was conducted. Some of these stores had more than 20 employees and the affected employees in these stores received protective awards. Mrs Wilson worked in a store which had only 19 employees and the original Employment Tribunal decided that the obligation to collectively consult had not been triggered, which led to her not receiving a protective award. However, on appeal to the Employment Appeal Tribunal (EAT) the Judge decided that this was incorrect. He stated, amongst other things, that the term “establishment” didn’t mean just one site, but the business as a whole. Therefore, if there were to be 20 or more redundancies in a 90 day period across the whole Company, then collective consultation obligations would apply to all those at risk of redundancy.

Woolworths and Ethel Austin appealed to the Court of Appeal (CoA), who then referred the issue to the Court of Justice of the European Union (CJEU) in order to clarify what an “establishment” was in this context. The CJEU have decided that the EAT’s interpretation of what an establishment amounted to was wrong. An establishment for these purposes means a local employment unit, and the duty to collectively consult would only be triggered if the employer proposed to dismiss 20 or more employees on the grounds of redundancy in a 90 day period at that unit. The case has been referred back to the CoA to decide whether each of Woolworths and Ethel Austin’s stores were local employment units.

While the final word is still to come from the CoA, it is difficult to see how they can come to any other outcome than to uphold the original Tribunal decision. This will mean that rather than having to try and work out when the obligation to collectively consult had been triggered by aggregating the number of redundancy dismissals across the entire business, in most cases it will be sufficient to treat each individual site as an establishment to assess when that obligation arises.

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James Tamm

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