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Landmark ruling extends scope of collective consultation

27th June 2013

Under the trade union and labour relations legislation employers are required to commence collective consultation where they propose to dismiss 20 or more employees at one ‘establishment’ within a period of 90 days or less. The legislation does not contain a definition of ‘establishment’ and the courts have approached it as a matter of judgment for them as to whether a business operation constitutes an independent unit or merely forms part of a larger unit.

In Usdaw and others v WW Realisation 1 Ltd (in Liquidation) and another, a case arising out of the Woolworths insolvency, the Employment Tribunal found that each Woolworths store was a separate establishment and that the obligation to consult collectively only arose in larger stores where 20 or more employees were to be made redundant.

The Employment Appeal Tribunal (EAT) overturned this decision in its landmark ruling delivered this month. The EAT held that the trade union and labour relations legislation does not fully reflect EU law and that the words ‘at one establishment’ are to be disregarded for the purposes of any collective redundancy involving 20 or more employees.

Impact on employers

Employers will be faced with more administration and more risk. The written judgment has not yet been published and the decision may be subject to a further appeal or the Government may intervene given that this decision is contrary to the Government’s stated intention of reducing the regulatory and administrative burden on businesses. However, in the meantime, employers proposing to dismiss as redundant 20 or more employees across several sites in a 90 day period will now be obliged to commence collective consultation. Any failure to do so will put a company at risk of protective awards being made against it.

What should employers do?

Employers considering redundancies will need to take this important decision into account before embarking on a redundancy exercise. In particular, employers with a number of branches or offices will need to ensure they have:

  1. a centralised monitoring process to keep track of the number of redundancies proposed across their business within a 90 day period; and
  2. systems in place ready to comply with the collective consultation requirements.

The contents of this update are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this update. © Mundays LLP 2013.

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