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Pensions Update

Redundancies – reversed Woolworths decision will require more employers to engage in collective consultation

In a landmark case, compensation estimated to be in the region of £5million, is expected to be awarded to a large number of ex Woolworths staff who had worked in stores with less than 20 members of staff. 

The administrators had failed to properly consult with the staff following the complete collapse of the business in 2008. As a result, their union, USDAW brought claims for protective awards, which were successful at the Employment Tribunal only in relation to those stores which employed 20 or more staff. This was because the tribunal decided that each individual shop counted as one “establishment” for the purposes of section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 which states;

“Where an employer is proposing to dismiss as redundant 20 or more employers at one establishment within a period of 90 days or less, the employer shall consult about the dismissals ...(with) appropriate representatives ... of the employees ...”

The union appealed on the basis that this approach to working out what is an establishment is contrary to the Directive. The EAT has ruled that the words “at one establishment” must be disregarded for the purposes of any collective redundancy involving 20 or more employees. This would mean that where a business is considering making 20 or more employees redundant within 90 days, the location at which the employees work is irrelevant.

Unless successfully appealed, this decision will have huge implications for UK businesses that operate out of a number of sites. It may mean that many employers are caught by the requirements to consult for a minimum period of 45 days rather than 30 days (as all potential redundancies will have to be included), or simply to collectively consult at all.

Large scale redundancies may become more expensive for employers who will have to employ all affected employees for longer because redundancies cannot be made until the consultation period has been completed (although notices of dismissal can be issued within the minimum consultation periods, in appropriate circumstances).

There may be some ways around this decision, but they are far from straightforward. For example, businesses may try to keep redundancies down to below 20 at a time (ie within each 90 day period) meaning that rolling restructuring may become even more common. This approach is likely to lead to employee disillusionment (and a dip in productivity) if the programmes are, or appear to be never ending. Also, that approach would be open to the argument that an apparent series of redundancy exercises are in fact, all one exercise and the number of employees to be dismissed in all could be aggregated.

Even if this approach is adopted, businesses may find themselves facing arguments as to when the redundancies were “proposed” which leads us into difficult territory. In cases and commentaries there is an argument that this aspect of UK legislation is also incompatible with the Directive which requires consultation to begin when redundancies are “contemplated”. The argument is that contemplation occurs at an earlier stage than a proposal. Although this issue is still be subject to the 90 day period rule, unions will be keen to find avenues to dissuade businesses from trying to circumvent the rules.

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