Newsflash: Important changes to collective consultation

In our June 2013 newsletter, Collective Consultation – headaches ahead, we warned you of an impending important decision on collective redundancies. And this is it!

Summary: Is the duty to collectively consult on 20+ planned redundancies (or changes to terms & conditions) triggered when the 20+ roles are spread across more than one of your sites?

Until now, the answer has been no, because you have been entitled to treat each site as a separate unit, so as long as you keep the number of redundant roles as fewer than 20 on any one site, you avoid the duty to collectively consult completely. There is no company-wide count undertaking. However, this judgment changes the rule. In a bold decision, the EAT upturns the long accepted legal position and rules that employers must now consult collectively whenever the planned redundancies or changes to T&C add up to 20+ across the whole of the UK business.

The decision USDAW v Woolworths is available here.

Facts: When Woolworths (and another employer named Ethel Austin) became insolvent, there was collective consultation on redundancies. Each store was treated as “one establishment” for this purpose, as has been accepted practice in the UK for many years, and as a result there was only collective consultation at the bigger stores, i.e. those with more than 20 employees on the one site. The trade union, USDAW, brought claims for protective awards on behalf of the former staff at Woolworths’ smaller stores who had not benefitted from collective consultation because the redundant staff on sites had not numbered 20.

The Tribunal applied the law as we all thought it to be and found that each store was a separate ‘establishment’ and consequently, the duty to consult was not engaged in respect of stores with fewer than 20 employees being made redundant. Therefore those staff were not given a protective award for a failure to collectively consult.

USDAW appealed to the EAT.

In a surprise decision, the EAT has held that the long-accepted understanding that the duty to collectively consult only kicks in when 20+ employees are being made redundant in “one establishment” does not reflect the relevant EU Directive. The EAT decided that, in order for the relevant UK legislation to reflect EU law, the words “at one establishment” should be deleted from the legislation and ignored by Tribunals. This decision is particularly surprising given that previous case law had suggested it was for Parliament, not the EAT, to correct any error in the UK legislation.

In light of the above, the employers should have collectively consulted in a way that covered all redundant employees, not just those at the larger stores. The result of the decision is that all the employees from the smaller stores (1,210 employees at Ethel Austin, and 3,233 at Woolworths) became entitled to a protective award, which can be anything up to 90 days’ gross pay for each employee.

Implications: As we suggested in our June 2013 newsletter, this judgment sits very badly with the well-established body of case law on this subject, so it is quite likely that it would be overturned in the Court of Appeal if it is appealed or contradicted by another EAT judgment in a future case. Until or unless it is appealed, however, it is likely to be seen as the current law.

The case therefore does have an important and immediate impact on how employers need to manage large-scale redundancy processes or changes to staff T&C’s, and employers should avoid the argument of avoiding a trigger of the collective consultation rule just by distributing their employees throughout different sites across the UK. This will certainly mean more administration and more risk for larger UK employers – both in terms of the co-ordination required to ensure the collective consultation trigger is not missed, and also the fact that collective redundancy consultation will be required more frequently.

As we’ve indicated in this Newsflash, it’s not just redundancies of 20+ employees that are effected. It is also any proposal by an employer to enforce a change to staff terms & conditions (with the ultimate threat of dismissal if the change is not agreed) where 20+ employees across the whole of the employee’s UK operations are affected.

If you are currently contemplating redundancies across different sites then please do contact Luke Menzies at luke@menzieslaw.co.uk or another member of the team for further advice.