Redundant ruling to aid employers

Changes to consultation rules for multi-site employers laying off staff has had a big impact on the economy, argues John Lee

Thousands of staff were made redundant from Woolworths. Picture: Greg Macvean
Thousands of staff were made redundant from Woolworths. Picture: Greg Macvean
Thousands of staff were made redundant from Woolworths. Picture: Greg Macvean

The implosion of high street stalwart Woolworths was one of several spectacular casualties of the recession. Whilst the ghosts of empty stores still haunt some of our high streets, the retailer has lingered in the consciousness of the UK economy, particularly of those with “multi-site” commercial operations. Woolworths’ demise had major impacts on the operations of other multi-site businesses on the entitlements of the employees and the consequent advice of both of their representatives.

Woolworths (and later Ethel Austin) entered administration in 2008 and 2010 respectively. Their collapses resulted in large-scale redundancies. Each business was required to consult collectively with their employees’ representatives, in accordance with their obligations under the Trade Union and Labour Relations (Consolidation) Act 1992. This requires employers to do so where they are proposing to dismiss as redundant 20 or more employees “at one establishment” within 90 days. At the time, consultations were required to be for a minimum of 30 days where 20 or more redundancies were planned and 90 days in the case of 100 or more redundancies.

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The Government has since taken action to reduce the maximum period of consultation to 45 days in the case of 100 redundancies or more. Breaching these can give rise to stiff financial liabilities against employers. Employees are entitled under the Act to “protective awards” of up to 13 weeks gross pay each.

At the time of the redundancies, multi-site businesses would generally address (and properly be advised to address) each distinct site as “one establishment”, such that only those sites where 20 or more redundancies were envisaged, would trigger those obligations. In the case of Woolworths/Ethel Austin, this meant around 4,400 workers being excluded from any entitlement to payments in respect of protective rewards from their administrators. Employees who worked at locations with 20 or more affected staff, were considered entitled to relevant payments.

When the employee representatives brought claims, these were initially rejected by Employment Tribunals. Those judgments were appealed and in 2013 the Employment Appeal Tribunal (EAT) decided the “one establishment” requirement should effectively be disregarded. This had the arguably cataclysmic consequence of the collective consultation requirements (and their attendant liabilities) being triggered wherever an employer proposed to dismiss as redundant 20 or more employees, whether at one location or on an aggregate basis across its multi-site operations.

The came when many employers were either engaged in or considering large-scale redundancies. Its effect was to draw a horse and cart through redundancy procedure. The proposition was a logistical nightmare for some employers, leaving them to consider how they might “collectively consult” potentially on a national basis with employee representatives when they only sought to reduce numbers at certain specified locations where less than 20 staff were affected.

The decision gave rise to potential obligations at unaffected sites which were not impacted by the unprofitable or loss making operations of others. Employers considering redundancies at that time were advised to proceed cautiously in situations where there were aggregate redundancies amounting to 20 or more.

The EAT’s Judgment was appealed, ultimately to the Court of Justice of the European Union (CJEU). As part of that process, the Advocate General issued his preliminary opinion on 5 February. This supports the “pro-employer” practice previously adhered to before the EAT’s 2013 decision. The opinion suggests it ought to be for Member States to determine whether employee numbers should be aggregated across whole businesses or restricted to specific sites. A key question referred to the CJEU was that of the correct interpretation of “establishment”. In that respect, the Attorney General said “That concept denotes the unit to which the workers made redundant are assigned to carry out their duties, which it is for the national court to determine.”

Although the CJEU is not bound by the Attorney General’s opinion, this is usually followed and a final decision is expected later this year. Uncertainty will remain for UK multi-site employers as the matter may be dragged on in the UK Courts. The Attorney General’s opinion suggests the fallout from Woolworths’ collapse ought to be felt with less force or apprehension.

John Lee is an Associate & Solicitor Advocate in Employment with DWF