This is a bombshell development for employers - the ruling utterly turns the law on collective redundancy consultation on its head and requires a fundamental rethink by employers.
The case arose from the collapse of Woolworths. USDAW sought protective awards for a failure to consult. The employment tribunal applied the rule in s188 TULRCA 1992 that a duty to consult employee representatives applied only where 20 or more redundancies were proposed at one establishment. Since each store was a separate establishment, the claims relating to stores with less than 20 employees failed. While employees in stores with more than 20 staff won protective awards totalling £70 million, those in smaller stores got nothing.
On appeal, the EAT ruled that the duty to consult applied to all of the proposed redundancies. The rule in UK legislation that consultation is only necessary where 20 or more redundancies are proposed at the same establishment was declared incompatible with the relevant EU Directive, which sets a trigger of 20 or more redundancies by the same employer within any 90 day period.
The 'same establishment' rule had to be ignored, and all redundancies proposed by the same employer in any 90 days must be taken into account regardless of where they occur. This successful appeal added another £5 million to the protective awards.
The decision creates an immediate dilemma for employers currently making redundancies who have wrongly assumed that collective consultation was unnecessary because fewer than 20 dismissals are planned at each establishment.
They are now exposed to protective award claims of up to 90 days pay per employee. Avoiding that penalty by backtracking, delaying the redundancies and carrying out proper collective consultation may not be feasible if the redundancies are so far progressed that they cannot now start genuine consultation with an open mind about ways of avoiding or reducing the redundancies and mitigating their impact. Damage limitation and an appeal for mercy from the tribunal may be a more realistic option than total compliance.
Going forward, employers face many practical problems. It is inevitable that redundancy proposals will emerge across the company in a piecemeal fashion, making it very difficult to predict with confidence precisely when the duty to consult will apply.
Does this mean collective consultation over every redundancy is the only safe option? Employers will need a consultation structure that can handle redundancies across multiple business areas and locations, different timelines and for very different business reasons. Without a single channel for consultation - a recognised trade union, or employee forum authorised to represent the "at risk" employees - this may be very difficult to accomplish.
One thing is clear - less than two months since the legislation on collective redundancies was amended to reduce the burden on employers, this case leaves employers with a whole new set of headaches and an uphill battle to avoid some of the heaviest penalties in UK employment law.
Chris Mordue is an employment law expert at international law firm Pinsent Masons