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collective consultation changes

16 January 2014
The implications of USDAW v Woolworths

Changes to the application of the law on collective consultation as a result of USDAW v Woolworths

Background
In the widely reported cases of USDAW v Ethel Austin Ltd (in administration) (UKEAT/0547/12/KN) and USADW (1) Mrs B Wilson (2) v WW Realisation 1 Ltd & others (UKEAT/0548/12/KN) (comnmonly referred to as USDAW v Woolworths) the Employment Appeal Tribunal (EAT) considered whether the relevant provisions of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) could be interpreted in line with the European Collective Redundancies Directive.

The case concerned the definitions of ‘collective redundancy’ in UK and European legislation, and whether the definition in section 188(1) TULRCA was inconsistent with its European counterpart. Under section 188(1), employers are obliged to inform and consult collectively where they propose to “dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less”. However, collective redundancy under the European Directive is defined as “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”.

The EAT, exercising a new found power of statutory amendment and out of kilter with previous domestic decisions on the point, decided that the words “at one establishment” should be deleted, confirming that the employees in the cases who had missed out on payments should now be compensated. The outcome is somewhat surprising as it is a significant change to the current law on collective redundancy consultation. It understandably raises concerns amongst employers with multiple sites.

The facts
At the beginning of 2009 Woolworths disappeared from our high streets, with thousands of staff made redundant. USDAW, on behalf of it members, bought a claim against the administrators of Woolworths (and consequently the Secretary of State) for failing to consult in advance of the redundancies pursuant to section 188 TULRCA. USDAW’s claim succeeded and protective awards were made, save that no protective awards were made to those who worked in stores with less than 20 employees. The administrators’ successfully argued that each store was a separate establishment for the purposes of section 188 TULRCA therefore limiting the impact of the obligation to consult on a collective basis. This meant 3,233 employees were left without an award. A similar decision based on this point was also made in the Ethel Austin case.

USDAW appealed the point to the EAT in both cases on the basis that this interpretation of section 188 was contrary to the purpose and objective of the original European Directive (i.e. to protect workers’ rights). It is unfortunate that no appearances or representations were made by the Respondents (including the Secretary of State) to the appeals. The EAT commented that this approach appeared “to misunderstand the legal issue in these appeals, and its importance”.

The arguments
At appeal USDAW argued that the Employment Tribunal had incorrectly interpreted the meaning of “at one establishment”. Three alternative interpretations were put forward, that section 188 TULRCA should be interpreted to require consultation where the employer proposes to dismiss 20 or more employees:

  • at one or more establishments; and/or
  • at one establishment, broadly interpreted widely to mean the whole of the relevant retail business rather than each of its locations; and/or
  • deleting the words “at one establishment”

Simply put, USDAW argued that section 188 should be read so as to ensure the duty to consult arises when an employer proposed to make 20 or more employees redundant irrespective of their place of work.

At one establishment
The EAT considered the meaning of ‘establishment’ in TULRCA and under the European legislation and accepted that the wording under TULRCA was more restrictive than under the Directive. It had to consider whether it had the power to interpret the domestic legislation purposively (as USDAW had argued). It noted that previous European cases had considered how the UK courts were permitted to interpret its own legislation in light of other European law (albeit not in relation to this particular provision of the European Directive). The EAT also considered the history of TULRCA and the way in which it had been amended by the government over time, noting that the original legislation provided for collective consultation when any number of employees were placed at risk of redundancy.

The EAT concluded that following the previous case law, it was permitted to interpret s188 so that it was compatible with the Directive, and that this could include the addition or deletion of words. It went on to state that as the European Directive makes it clear that the location of where people work is irrelevant, the duty applies whatever establishment they work in. The UK was not entitled to dilute the protection afforded by the European Directive and as a result the UK had failed to implement the Directive correctly in its domestic legislation. This being the case, the EAT held that it had powers of statutory amendment which allowed it to delete the words “at one establishment” as put forward by USDAW in option (c).

Interpretative obligation
The EAT went on to state that it would also have been prepared to accept USDAW’s (b) option. If it had been found that it was not possible to delete the wording “at one establishment” from s188, it would have been permitted under another set of European cases to interpret the wording in such a way to as to give effect to the original purpose of the European legislation which in this case was the protection of workers’ rights. In this instance, it would have interpreted the phrase “establishment” to mean the whole of the retail business rather than each particular site.

What are the consequences?

  • separate sites will no longer be considered as separate establishments
  • any current redundancy exercises may need to be reviewed by the Insured company to determine if they are at risk of challenge
  • when proposing redundancies, an insured company will need to consider the action to take by reference to the organisation as a whole
    • it will not be possible for a company to distribute staff across different sites in order to try and sidestep the duty of collective consultation
  • inevitably collective consultation will be required more frequently, with a corresponding increase in cost and time
  • there is an increased risk for large UK employers who operate across several offices of paying protective awards where they miss the collective consultation trigger point
  • it would be prudent to advise employers to consider designating a person with responsibility for coordinating all redundancies across all sites, and set up an employee representative body comprising representatives across different sites
  • the risk is broadened by the fact that this judgment doesn’t just relate to redundancies. It applies wherever a collective consultation might arise, including changes to staff terms and conditions which could result in dismissal or re-engagement.

But this is not the end of the story
The Secretary of State is, perhaps unsurprisingly, not keen to pay the protective awards (which amounts to approximately £5m) and has appealed the decision. In addition, the Northern Ireland Industrial Tribunals have also referred the question of the meaning of ‘establishments’ to the Court of Justice of the European Union in the case of Lyttle and Ors v Bluebird UK Bidco 2 Ltd C-182/13. Watch this space!

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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