Change to UK collective redundancy laws "inevitable", says expert, as Government granted leave to appeal Woolworths case

Out-Law News | 17 Sep 2013 | 4:38 pm | 3 min. read

The Government is not guaranteed a "favourable outcome" in its appeal of a tribunal's finding that consultation requirements under the collective redundancy rules were triggered when retailers made redundancies in multiple shops, an expert has said.

Christopher Mordue of Pinsent Masons, the law firm behind Out-Law.com, was commenting as the Employment Appeal Tribunal (EAT) granted the Department of Business, Innovation and Skills (BIS) leave to appeal the ruling. In a case involving retailers Woolworths and Ethel Austin in May, the EAT ruled that a requirement that employees had to work "at one establishment" before the obligation to consult would be triggered was "here and after to be disregarded" when redundancies involving more than 20 employees were proposed.

"The Woolworths decision was without doubt one of the most significant employment law developments for many years, not only transforming the scope of the obligations on employers to collectively consult on redundancies but also raising huge practical problems for employers in terms of compliance and creating a vastly increased risk of very expensive protective awards," Mordue said. "The news that permission to appeal has been granted will be welcomed by employers but a favourable outcome is in no way guaranteed."

"It seems clear the EAT was correct to conclude that the UK requirement for 20 or more proposed redundancies 'at one establishment' before the consultation obligation is triggered fails to comply with the triggers for consultation set out in the corresponding EU legislation. The real issue on the appeal is whether the courts can lawfully rewrite the UK legislation so that it complies with EU requirements: that is where the substantive battle lines will be drawn in the Court of Appeal," he said.

The best that BIS and employers could "realistically" hope for from the Court of Appeal was a ruling that although the UK law breached the requirements of the EU's Collective Redundancy Directive, it was down to Parliament to make the necessary change and not the courts, he said.

"But even that outcome would make it inevitable that UK law would have to be changed and so only provide a temporary respite for employers," Mordue said.

Collective redundancies are those where an employer proposes making 20 or more employees redundant within a 90-day period. Employers must consult on their proposals for collective redundancies with unions or representatives of the affected employees for at least 30 days, or 45 days where more than 100 employees are affected, before they can make any redundancies.

The consultation requirement comes from the EU's Collective Redundancy Directive, which is given effect to in the UK under the Trade Union and Labour Relations (Consolidation) Act. However, the UK's version of the rules includes a limitation that the proposed redundancies must be "at one establishment" before the consultation requirement applies.

In May, trade union USDAW won a case on behalf of over 3,000 former Woolworths employees and over 1,200 former Ethel Austin employees who worked at smaller stores and were not consulted before being made redundant. Employment tribunals can make enhanced 'protective awards' when the consultation requirements are not met; however, before the EAT's ruling only those employees who worked at stores with 20 or more employees were entitled to these awards due to the administrators' failure to consult in each case.

Until the outcome of the appeal is known, the EAT's ruling on "establishment" reflects the current position under UK law. Separately, the Northern Ireland Industrial Tribunals has asked the Court of Justice of the European Union (CJEU) to clarify the meaning of "establishment", in relation to an alternative threshold set out in the EU's Directive. Mordue said that, given this background, there was a "strong case" for BIS to consider providing certainty to business in the form of a "lasting legislative solution".

"Employers are likely to favour a more permanent and legislative solution, that scales back the situations in which they have to collectively consult about proposed redundancies and reduces the risk from protective awards," he said. "That could be achieved by BIS adopting the alternative trigger from consultation set out in the Directive: essentially, the proposed dismissal of 10% of the workforce at any one establishment within 30 days or less. This would be a valid way of reintroducing an establishment-based trigger."

"Furthermore, BIS could look to shorten the length of protective awards from 90 days down to 30 or 45 days, as another means of easing the burden of the approach in the Woolworths case on businesses," he said.