Usdaw and others v WW Realisation 1 Ltd (in liquidation) ET/3201156/10 and others
Date added: 2 February 2012
redundancy | collective consultation | protective award
In this case, the employment tribunal awarded 24,000 Woolworths employees 60 days' pay for the company's failure to consult collectively on their redundancies. However, around 3,000 staff who worked in Woolworths stores that had fewer than 20 employees missed out on protective awards, a result that is likely to be appealed.
Practical tips
Employers that are placed in administration should not wait until all possible buyers have been ruled out before beginning consultation, as it will then be too late to consult meaningfully.
The "special circumstances" defence absolving the employer from the duty to undergo collective redundancy consultation will succeed only in exceptional circumstances.
Where the employer is insolvent and has been placed in administration, the fact that it is seen as inevitable that the company will cease trading is not a valid reason for a complete failure to consult collectively. |
Woolworths employed over 27,000 employees in its stores and in other areas such as distribution centres and offices. The company had trade union recognition agreements with the unions Usdaw and Unite and a national joint consultation committee (JCC) under collective bargaining arrangements. The committee included Ms Wilson, who worked at the St Ives store in Cornwall and represented Usdaw's South Wales and Western division, and Mr Gorle, who was Usdaw's national official and had primary responsibility for the relationship with Woolworths on a national basis.
In November 2008, Mr Gorle heard a rumour that Woolworths' credit insurance had been withdrawn, something that would have had serious implications for the company. Mr Gorle tried to get confirmation from Ms Yarranton, Woolworths' employee relations manager. Shortly after that, reports appeared in the media that shares in Woolworths had been suspended and the company was in discussions with a restructuring firm, Hilco, to sell all Woolworths stores for the nominal sum of £1. Mr Gorle spoke to Ms Yarranton, who indicated that she was not fully aware of all the facts and would get back to him. Further media reports suggested that the company faced the real risk of going into administration.
On 27 November 2008, Deloitte plc was appointed as the company's administrator, with Hilco assisting in the management of the retail business. Deloitte announced that Woolworths would continue to trade and stores would remain open beyond Christmas 2008. Deloitte said that it would be looking for a suitable buyer for all parts of the business.
By this time, Mr Gorle had been contacted by Deloitte's Ms Harley, who assured him that staff would be paid as normal. A newsflash about the administration was placed on the Woolworths intranet confirming that wages due on 28 November 2008 would be paid. On 2 December, Mr Gorle emailed Ms Harley seeking an update on whether or not stores would continue to trade through the Christmas period. Ms Harley's reply was that store trading would be dependent on there being a sale of the business. She refused to give him any information on potential purchasers because such discussions were "necessarily held on a confidential basis".
On 5 December 2008, rumours began circulating about redundancies. Mr Gorle was contacted by Ms Harley, who told him that there would be redundancies in specific areas. She said those employees were being notified immediately. Mr Gorle indicated that there had not been any meaningful consultation. On 9 December 2008, a company newsflash to all employees clarified that, while the administrator hoped to sell Woolworths as a going concern, if it was unable to do so, it would not be possible for the company to give employees their contractual or statutory notice periods. On 10 December 2008, a lay colleague forwarded Mr Gorle a message put out by the administrator to staff that day that said that there would be a closing down sale and their jobs would be put at risk of redundancy.
Meanwhile, on 6 December, Ms Harley emailed Mr Gorle to say that there would be an "information and consultation meeting" on 16 December in London, with others joining by conference call. Mr Gorle telephoned Ms Harley to express his continued concerns about what he regarded as a lack of consultation. He suggested that the union become more involved with the search for a buyer and gave assurances that he would treat anything he learnt as confidential. He offered to sign a confidentiality agreement.
Ms Wilson, based at the St Ives store, learnt of the unfolding events through media reports and seeing announcements issued by Woolworths on the intranet. She was also in contact with Mr Gorle. She and other colleagues on the JCC were all asked to take part by conference call in the meeting scheduled to take place in London on 16 December.
The meeting went ahead on 16 December, hosted by Mr Kahn of Deloitte. Around 40 to 50 union members were listening in by conference call, including Ms Wilson. At the meeting, Mr Kahn delivered a prepared statement to the effect that, as no buyer for the stores had been found, it was envisaged that all 807 Woolworths stores would close in four phases from late December 2008 to early January 2009. Mr Khan said that employees' wages would be paid for the whole of December and any days worked in January. Information was given about employees' entitlement to statutory payments if they were made redundant, and what they would need to do to claim their entitlements. Although Mr Gorle asked some questions, it was not really possible for those listening in, such as Ms Wilson, to participate in the meeting. As the meeting progressed, the quality of the telephone line deteriorated anyway. The meeting lasted for about one hour.
On 17 December 2008, Mr Kahn wrote to Usdaw and Unite members with a record of the previous day's meeting. Mr Kahn confirmed that the reason for the proposed redundancies was that it was envisaged that all stores would cease trading by the beginning of 2009 unless a viable buyer was found. It identified that the entire workforce was therefore at risk, and indicated that the method of selecting employees would be dependent on the sale process. If there was no sale, the entire workforce would be made redundant. The letter set out the envisaged timetable for store closures. The letter indicated that the company was not in a position to provide any enhanced redundancy payments, but that there would be a process for employees to claim statutory entitlements from the National Insurance Fund. The record said that the administrator would listen to any further thoughts or proposals from staff.
In the event, no parts of the business were sold as going concerns. All of the stores were closed over four stages and all Woolworths employees were made redundant. This process began on or around 27 December 2008 and continued into January 2009, broadly in line with the timetable that had been envisaged at the 16 December 2008 meeting.
The unions Usdaw and Unite pursued a tribunal claim for protective awards for their members, with Ms Wilson entered as a co-claimant on behalf of all supervisory, technical and managerial staff falling outside of the scope of the recognition of Usdaw and Unite. The employment tribunal considered the position of former Woolworths staff in England, Scotland and Wales only, noting that a Belfast industrial tribunal had already awarded 60 days' pay to former Woolworths employees in Northern Ireland.
The key issues for the tribunal were:
- whether or not the consultation that took place was sufficient to meet the company's obligations under s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A); and
- if not, whether or not there were any "special circumstances" under s.188 of TULR(C)A that justified insufficient consultation; and
- if not, whether or not the protective award should be limited to staff who were working in Woolworths stores with 20 or more employees.
The tribunal considered that, given the financial situation of the business, the administrator must have at least "contemplated" from the outset the possibility of redundancies. Although the tribunal could not say that redundancies were "proposed" from the very first day of the administration, by the time of the 9 December 2008 circular, it had been acknowledged to the whole workforce that their employment might not continue beyond a certain point. It was also apparent by this stage that there was not going to be a quick sale of the business.
The tribunal concluded that, by 9 December 2008, redundancies were being proposed (albeit the possibility of a sale had not been abandoned), and the duty to inform and consult was triggered. Once that point had been reached, the process of consultation should have begun "in good time" and at least 90 or 30 days (depending on the size of the particular establishment) in advance of the proposed redundancies. It would become necessary to close the stores at a certain point, justifying a truncated information and consultation period. However, this only justified the shorter duration of the consultation period and did not alleviate the duty to begin consulting in good time. It did not make it impractical to have a genuine consultation process during the period that was left.
The tribunal went on to note that the mere fact of insolvency will not amount to "special circumstances". Woolworths' parlous financial situation and the fact that it was in administration did not by themselves excuse the failure to comply with the s.188 duty. Even though there were circumstances making it not reasonably practicable to continue the process beyond the dates when stores in fact closed and redundancies took effect, the company was still required to take whatever steps it could that were reasonably practicable in the circumstances.
The tribunal noted that no consultation occurred prior to the meeting on 16 December 2008. The tribunal accepted that, had the union been permitted to be more involved in the process, it might have been able to contribute to a successful sale, thereby helping to ensure that the company complied with its consultation obligations. It should not have been assumed that considerations of confidentiality necessitated the union's total exclusion from any sale process. It was not a reasonable excuse that consulting on potential redundancies would have undermined sale discussions or made the insolvency or redundancies a self-fulfilling prophecy, especially as Woolworths' grave financial situation was already public knowledge. The letter to staff dated 17 December 2008 may have provided the required statutory written information to allow consultation to begin, but it should have been provided earlier. The tribunal held that the information given in this letter could have been provided once the duty to consult was engaged.
The tribunal also decided that the meeting on 16 December was more of an announcement of what would happen, rather than genuine and open-minded consultation. Although the large number and geographical dispersal of union members meant that the logistics were challenging, communication and attendance could have been better organised. More time should have been allowed for the meeting.
The tribunal said that the level of the protective award in this case should be 60 days' pay. However, the tribunal went on to limit the award to employees who had worked in an "establishment" with 20 or more employees, meaning that staff who worked in smaller Woolworths stores with fewer than 20 employees would not be entitled to an award. The tribunal held that each individual store was a distinct establishment for the purposes of s.188 of TULR(C)A. Although "establishment" is not defined in TULR(C)A, the European Court of Justice (ECJ) has provided clear guidance in cases like Rockfon A/S v Specialarbejderforbunet i Danmark, acting for Nielsen and others [1996] IRLR 168 ECJ as to what constitutes an establishment for these purposes. The ECJ in Rockfon decided that an establishment is a "unit to which the workers made redundant are assigned to carry out their duties". The ECJ stressed that it is not essential for the unit in question to be endowed with management that can independently undertake collective redundancies.
Applying the ECJ case law, the tribunal concluded that the stores were physically distinct premises. Each had its own organisation, headed by its own store manager. Each had a distinct purpose, which was to serve the customers who visited that particular store. Each of the affected employees worked at a particular store. There was no basis to conclude that the nature of the organisational structure meant that employees who worked at particular stores were more closely assigned to, or part of, some other type of organisational unit that was more important than the individual stores.
Additional resources
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