Before joining employment law firm Vista, I was one of the advocates [for Unite] in the famous Woolworths case, where staff from the failed retailers received a £5 million payout. I am regularly asked to discuss the significance of the case and its impact on UK law. It is certain that its repercussions for employers seeking to make large-scale redundancies will be immense.
As well as being one of the largest ever protective awards (circa £70 million), the case had a profound effect on the legal obligation to collectively consult prior to large-scale redundancies. The Employment Appeal Tribunal’s bold step of re-writing Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) caused quite a shock.
Before this case, employers were able to make large numbers of employees redundant provided that fewer than 20 of them worked at the same site. Employers knew they could argue that each establishment, site, or unit was separate; therefore smaller scale redundancies would fly below the collective consultation radar. The change in law now means that companies must closely track dismissals across all of their locations. The key change was the removal of the phrase “at one establishment” that featured in Section 188(1) of TULRCA.
The perfect storm came with the sad demise of two household giants, Woolworths and Ethel Austin. Both retailers had stores employing fewer than 20 individuals at different locations. In total, dismissals ran into tens of thousands. Claims sought to address what several trade unions and their members perceived to be an unfair and arbitrary outcome. Employees that worked at stores with fewer than 20 staff would not benefit from protective awards despite facing the same lack of consultation before their dismissals.
The Woolworths case appeared in the summer of 2013. Its core issue was whether the duty to collectively consult is owed when 20 employees are dismissed or when 20 are dismissed “at one establishment”: a site-by-site atomised approach, or a holistic approach.
The Employment Appeal Tribunal rewrote TULRCA by removing the words, “at one establishment”, thus achieving compliance with EU law: in other words, once an aggregated number of 20 employees are dismissed from any site or location in the business the duty to collectively consult will be triggered.
One of the remarkable features in the Woolworths case was that despite its unprecedented size and import, the secretary of state did not engage with the proceedings sooner. Judges at each level have been dumbfounded by the Government’s lack of participation: apparently they simply failed to grasp the possible impact.
So what does this change in the law mean for employers today?
Any failure to collectively consult can result in a protective award claim of up to 90 days’ pay per employee affected. For example, an employer dismissing 19 people (all on £550/week) from site A and 19 from site B within a 90 day period, and failing to collectively consult, could be liable for over a quarter of a million. At a time when an employer needs to reduce staff numbers, this could send them into administration.
I don’t believe that employers should expect the status quo to return. The matter has been referred to the Court of Justice of the European Union to clarify the meaning of “establishment” for the purposes of collective consultation. While the concept of “establishment” may currently be rendered irrelevant for triggering the duty to collectively consult, businesses and lawyers alike will be keeping a keen eye on Europe.
Chris MacNaughton is a senior employment law consultant at Vista