Collective Consultation – the latest instalment on when to do so

Anna Moyle

When will employers who want to make redundancies have to consult on a collective basis?

We don’t know.

But the European Court of Justice has been asked to consider the Woolworths case.

So we still won’t know for some time.

The Court of Appeal has referred the case of USDAW v Ethel Austin Ltd  to the European Court of Justice. The case is more commonly known as “the Woolworths Case” and is potentially of great significance to any employer who may want to make 20 or more employees redundant.

Depending upon what the ECJ says, such redundancy exercises may be far more likely to trigger the requirements of collective consultation, and employers may have to consult for longer, and more widely, before any redundancies can take effect.

To recap: when Woolworths and Ethel Austin went into administration in 2008 it was necessary to make most of the work force redundant. Current UK legislation (TULCRA 1992) requires an employer to consult on a collective basis when it is “proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less“. In line with what had been accepted practice for many years each Woolworths store was considered to be “one establishment”. As a result there would only be a requirement to consult collectively in those stores that had more than 20 employees. In fact the administrator did not carry out any consultation at all. However, it was only those employees who worked at the larger stores (i.e. with 20 or more employees) who were found by the employment tribunal to be entitled to protective awards (of between 60 and 90 days’ actual pay). This meant employees who had worked out of the smaller stores, which were sometimes only a short distance from the larger stores, missed out. The USDAW union appealed on behalf of these employees.

Following a hearing in May 2013, the Employment Appeal Tribunal ruled that employers should not be able to dodge collective consultation obligations by scattering redundancies around different locations. This decision was reached on the basis that the words “at one establishment” in TULCRA are inconsistent with the relevant EU Collective Redundancies Directive 98/59/EC and so a purposive interpretation should be applied to TULCRA. The immediate result of the EAT’s decision was that 1,210 former employees of Ethel Austin and 3,233 at Woolworths became entitled to a protective award. With these companies having gone into administration, and the tax payer  being liable for the bill, the government appealed.

The Court of Appeal has decided to ask the ECJ to consider 2 distinct issues; the construction of the relevant provisions of the EU Collective Redundancies Directive (in particular the meaning of “establishment”) and whether the Directive has direct effect against the Secretary of State. It is likely that the ECJ will hear the case at the same time as another one dealing with similar issues and referred by the Northern Ireland Industrial Tribunal (Lyttle and Others v Bluebird UK Bidco 2 Limited).

What the ECJ says will be of great importance for all employers with 20 or more employees, so watch out for further updates. In the meantime, when deciding whether the requirement to consult on a collective basis has been triggered, prudent employers should disregard the issue of whether or not the employees at risk are based at the same location.