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The Need for Collective Consultation When Making Redundancies

By Jean- Pierre Van Zyl, partner and head of the employment group at Square One Law

Jimi Hendrix is reported as having once said “if it was up to me there would be no such thing as the establishment”. Perhaps this is what the Employment Appeal Tribunal had in mind when they reached their recent decision on the collective redundancy consultation process.

The case in question arose from two sets of proceedings involving the former employees of Woolworths and Ethel Austin who had been dismissed as redundant after the stores were closed. The employees claimed that there had been a failure to consult and the tribunals, at first instance, upheld this contention and made protective awards. However, the tribunals found that each store was a separate establishment and therefore it excluded from the protective awards those employees who were made redundant from stores where there were fewer than 20 employees dismissed. This exclusion meant that approximately 4,400 employees did not receive the protective awards that were made to their colleagues. The question to be determined by the EAT was whether the exclusion was correct.

Employers will be aware of the obligation to engage in collective consultation where they propose to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. The domestic legislation setting out this requirement was intended to implement the EU Collective Redundancies Directive which defines collective redundancy as the dismissal, over the period of 90 days, of at least 20 workers, whatever the number of workers in the establishment in question. The EAT in this case was required to consider the distinction in the legislation.

On behalf of the employees excluded from the protective award, it was argued that the domestic legislation is more restrictive than the Directive by virtue of the site based restriction and accordingly should be construed in such a way that would comply with the Directive in affording greater protection and rights for employees. Upon considering this issue, the EAT held that the words “at one establishment” should be deleted from domestic legislation in order to apply the purpose of the Directive. This means that protective awards, of up to 90 days’ pay, will be due to those employees previously excluded.

However, whether the decision will be challenged on appeal remains to be seen.

Subject to an appeal, the decision has far reaching implications for employers currently conducting mass redundancy exercises or considering doing so. Employers who had previously safely assumed that the collective redundancy procedures would not be triggered, now need to reassess whether the dismissals should be aggregated and collective consultation commenced. This will inevitably result in delays, costs and complications in the process adopted.

Employers will also need to bear in mind that the definition of redundancy, for collective consultation purposes, also covers termination and re-engagement for the purposes of changing terms and conditions so employers need to ensure that they are not caught out where such dismissals are proposed or have taken effect.

For the time being, in the light of the EAT’s decision, employers should consider adopting a cautious approach and comply with the collective consultation procedures where they propose 20 or more redundancy dismissals within a period of 90 days or less. Failure to do so may result in a protective award of up to 90 days’ gross pay per affected employee.

The case referred to above is USDAW v Ethel Austin Limited (in administration) and USDAW and another v WW Realisation 1 Limited and others UKEAT/0547/12 and UKEAT/0548/12. For further information please contact Jean-Pierre van Zyl, Head of Employment at Square One Law on 0843 224 7925.

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