The implications of the Woolworths redundancy decision
Author: Darren Newman
Consultant editor Darren Newman looks at the implications of the ruling that ex-Woolworths staff who worked in stores with fewer than 20 employees should be compensated for the lack of consultation over their redundancy.
Some employment law subjects refuse to stand still. The latest amendment to the rules on collective redundancies took effect only in April, with the consultation period cut from 90 days to 45 where 100 or more redundancies are proposed. Now it appears that a further amendment is needed, or at least it will be if a recent Employment Appeal Tribunal (EAT) decision is upheld.
The decision of the EAT in Usdaw and others v WW Realisation 1 Ltd (in liquidation), which arises from the insolvency of Woolworths, has not yet been published. However, reports from the union's solicitors suggest that the EAT has ruled that the threshold at which the duty to consult employee representatives over proposed redundancies arises is when the employer proposes to dismiss 20 or more employees across the business as a whole rather than (as the statute clearly states) when it proposes to dismiss 20 or more at "one establishment" (see s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992).
Woolworths is not defending the claim of course, but the Government is. Under the insolvency provisions in the Employment Rights Act 1996, the Secretary of State is liable for up to eight weeks' worth of each protective award made by the tribunal for a failure to consult, subject to the statutory cap on the amount of a week's pay. Given the number of individuals involved, it is a sum of money worth arguing about. Even more important, however, is the impact that a change in the law will have on large-scale reorganisations across the country.
The reason for the ruling is that the Collective Redundancies Directive (98/59/EC) (on which s.188 is based) gives member states two options in setting the thresholds at which the duty to consult kicks in. Option one involves 10% of the workforce in an establishment being made redundant over a period of 30 days (or 10 or 30 employees in very small and very large establishments respectively). Option two - adopted by the UK - is 20 redundancies over a period of 90 days "whatever the number of workers normally employed in the establishments in question".
The important point about option two is that it does not seem to allow the UK to insist - as s.188 does - that all 20 of the redundancies should be confined to a single establishment. It seems that the EAT has held that the words "at one establishment" must therefore be disregarded as being in breach of the Directive.
The implications are profound. Take the example of a local authority that, over the course of the summer, makes three people redundant in a school, closes a community centre making four people redundant, reorganises its central administration causing 10 further redundancies and makes seven people redundant at one of its leisure centres. On the face of s.188, the duty to consult representatives would not arise because each redundancy exercise is clearly taking place at a separate establishment and none involves 20 or more employees being dismissed. However, if the Usdaw case holds good, s.188 will apply and there will need to be consultation with union representatives before the first of these redundancies takes effect.
For very large organisations where such exercises are unlikely to be run centrally, the requirement to consult in such circumstances will simply be unworkable. There will be no way of telling whether a particular redundancy exercise is covered by the duty to consult or not, because that will depend on what other parts of the business are doing in different parts of the country.
On the other hand, the current arrangements are also difficult to defend. If the single-establishment rule is strictly applied, an employer can carry out extensive redundancies and avoid the duty to consult altogether if the numbers are limited to 19 at each establishment - although, if the employer is obviously manipulating the thresholds, a tribunal may well feel able to take a wide view of what a single establishment actually is. Case law from the European Court of Justice (ECJ) allows plenty of scope for interpretation.
One complication is that the provisions of s.188 include specific requirements about consultation that are not included in the Directive. For example, the period that must elapse between the start of consultation and the first dismissal taking effect (30 or 45 days, depending on the number of redundancies) is not found in the Directive. Nor does the Directive make any specific provision about what the remedy for a failure to consult should be; the protective award under which up to 90 days' pay can be awarded to each redundant employee is a domestic invention. While the single-establishment threshold does indeed seem to be in breach of the Directive, it is hard to say what the consequences of that should be. Simply disregarding the threshold would result in a statutory scheme that goes significantly beyond both what the Directive requires and what Parliament intended. Can that really be right?
Changes in the law of this magnitude are not resolved by EAT judgments. There will almost certainly be an appeal, possibly all the way up to the Supreme Court, and that takes time. The nightmare scenario is a reference to the ECJ, which can spend well over a year considering a case. It would be irresponsible for any government to allow ambiguity over an issue as important as this to remain for so long. Section 188 needs to be revisited and the scope of the duty to consult clarified so that it unambiguously complies with the Directive and employers know where they stand. The best approach might be to adopt option one from the Directive and base the threshold on the percentage of employees being dismissed at an establishment.
However, if the point at which consultation is triggered is changed, this might give the Government a good reason to look again at the minimum periods for consultation and even the remedy available. Usdaw may be celebrating a great legal victory for now. However, if the end result is that the statutory scheme is changed to go no further than the Directive requires, the victory may be a rather empty one.
