Out-Law News 2 min. read
03 Jun 2013, 4:29 pm
Christopher Mordue of Pinsent Masons, the law firm behind Out-Law.com, said that the EAT's decision in a case involving former employees of the Woolworths and Ethel Austen chains "massively extended" the scope of an employer's obligation to consult over collective redundancies.
The EAT's decision has not yet been published, but it has ruled that where in the business the employees worked was "here and after to be disregarded" when redundancies involving more than 20 employees were proposed, according to the law firm that represented the workers and their trade union, USDAW. Previously, employees had to work "at one establishment" before the obligation to consult would be triggered.
Mordue said that if the law firm's report was correct, the verdict was a "very worrying development" for large employers operating from multiple sites.
"Up until now, the position under UK law has allowed employers to treat different sites or business divisions as separate establishments, avoiding the need for collective consultation if less than 20 redundancies are proposed at each separate establishment," he said. "This change means that the obligation to consult will apply much more frequently than it has to date and indeed there is scope for employers being subject to a continuous process of collective consultation if individual redundancies across their business have to be aggregated together."
"The penalties for breaching the collective consultation obligations are severe – protective awards of up to 90 days' pay per affected employee – and in practice one of the most expensive potential liabilities for breach of employment law. This decision is likely to lead to a significant increase in claims against employers," he said.
Collective redundancies are those which up until this decision involved 20 or more employees at a 'single establishment' within 90 days. An employer which proposes to make collective redundancies must consult on its proposals with unions or representatives of the affected employees. The law in this area has recently changed, so that where an employer is proposing to make more than 100 employees redundant it must allow for at least 45 days consultation. A minimum consultation period of 30 days applies where between 20 and 99 employees are potentially affected.
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 'establishment' limitation is only included in the UK's version of the rules. When retailer Woolworths became insolvent in 2008 and failed to consult before making 27,000 staff redundant, over 3,000 former employees working in smaller shops with less than 20 employees did not receive compensation. The decision will also apply to over 1,200 former employees of womenswear retailer Ethel Austin, whose case was decided at the same time by the EAT.
Employment law expert Christopher Mordue said that the decision would create some "very practical problems" for employers, in addition to the additional consultation burdens.
"First, they will need to make sure that they have sufficient visibility of what is happening across the business to know whether the obligation to consult has been engaged," he said. "Employment of those at risk of redundancy may have to be extended to observe the minimum notification periods required under the collective consultation legislation. There is a huge risk that new redundancy proposals will mean that other redundancies which are already well progressed will become subject to the duty to consult, delaying implementation."
"It is ironic that one of the disappointments for employers from the Government's recent change to the collective consultation legislation was the failure to provide a clearer definition of 'establishment' than exists in the current case law. This decision solves that problem in the worst way possible for employers - by making the concept utterly irrelevant," he said.
