In 2013 the Employment Appeal Tribunal (“EAT”) greatly increased the likelihood that redundancies across a business would trigger complex collective redundancy consultation obligations following its decision in the case of USDAW and another v WW Realisation 1 Ltd (in liquidation) and others otherwise known as the “Woolworths case”. The EAT decided that European law required businesses to aggregate all redundancies across their business, over a 90 day period when assessing whether the 20-redundancy threshold was met for collective consultation purposes.
The Advocate General has suggested that this is not necessary and businesses may soon be able to go back to the previous requirement, which only requires collective consultation to take place if 20 or more employees are to be made redundant at one establishment within a 90 day period.
The cases focused on former employees at Woolworths and Ethel Austin who were made redundant in 2008 and 2010 respectively. They claimed that they were not collectively consulted with correctly by the Administrators following the complete collapse of the businesses.
Unions acting on behalf of the affected staff successfully claimed ‘protective awards’ (of up to 13 weeks’ pay per employee) in the Employment Tribunal. However, only the employees who worked in larger shops (i.e. those with 20 or more staff) received these. That left over 4,000 staff who worked at smaller stores who did not receive protective awards.
The reason for this was that the Tribunal decided each individual store counted as one ‘establishment’ for the purposes of section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”).
The USDAW union appealed to the EAT on the basis that this approach to working out what is an establishment is contrary to the Collective Redundancies Directive.
The EAT decision
The EAT took the view that in order to bring UK legislation in line with European law, the words ‘at one establishment’ should be removed altogether from section 188(1) of TULRCA. This brought about a significant legal change in the law on collective redundancies.
Previously, employers had been able to distinguish business units based on geography and the level of management autonomy when calculating the numbers of redundancies. This meant that locations where there were less than 20 employees being made redundant did not usually qualify for collective consultation, even though redundancies were taking place elsewhere in the business.
This created a headache for many employers, particularly those that manage significant workforces (and may at any one time propose to make 20 or more roles redundant across the business).
The Woolworths’ decision was appealed to the Court of Appeal last year. They decided to refer it to Court of Justice of the European Union (“CJEU”) to determine if the UK had properly implemented the Directive on collective redundancies.
The Advocate General’s opinion was released on 5 February 2015. In his view European law does not provide protection for all workers, or require businesses to aggregate all redundancies. This is because the Directive was intended to support local communities affected by collective redundancies which, without protection, might otherwise ‘wither and fade away’.
This opinion is, in principle, good news for UK employers. However, the Advocate General confirmed that there is nothing to preclude a member state from increasing the level of protection for employees (although it is difficult to see why the UK Government would interfere with a piece of legislation that has been on the statute books since 1992 and has been applied, without difficulty, up until 2013).
What happens next?
The role of the Advocate General is to provide an official opinion on cases before the CJEU makes definitive rulings. The Court is not obliged to accept opinions, but is very likely to do so.
The CJEU is expected to rule on this matter later in the year and we can only hope that common sense prevails and the Advocate-General’s opinion is accepted. Businesses need to know where they stand and this situation is wholly unsatisfactory, not least because the risk of getting the process wrong can expose companies to protective awards running into hundreds of thousands of pounds.