Redundancy consultation law redefined

The UK’s national redundancy consultation legislation has been called into question by decisions in two legal cases during the first half of 2013. The Employment Appeal Tribunal was asked to consider whether the UK was complying with an EU directive on redundancy consultation. The tribunal has ruled that the minimum threshold for consultation, currently the proposed loss of at least 20 jobs, must apply to the whole of an affected company and not just to one establishment within it.

UK legislation reinterpreted

In the UK, the statutory obligation for employers to consult employee representatives about the impact of collective redundancies is triggered ‘where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less’, as set out in section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992, as amended.

When the chain store Woolworths closed all its UK stores between 2008 and 2009, some 3,000 former employees were working in smaller branches where fewer than 20 redundancies were made. They were initially excluded from being eligible for compensation for their employers’ failure to consult them about the redundancies. An employment tribunal ruled that their establishments had no legal right to consultation because the number of redundancies in them did not reach the minimum threshold (UK1202019I).

The union Usdaw appealed against this decision. On 30 May, in a judgement on the Woolworths case and another related case, the Employment Appeal Tribunal (EAT) reversed the decision, stating that UK law needed to be rewritten in the light of EU Directive 98/59/EC (46.6 KB PDF). The directive establishes a duty to consult over redundancies when it is proposed to make 20 or more employees redundant across the business as a whole, not just at one establishment.

The EAT held that the words ‘at one establishment’ should be deleted from section 188 in order to conform to the EU Directive, article 1 of which refers to ‘the establishments in question’ in the plural.

Reactions from unions and employers

The ruling is widely considered by labour law analysts to have major implications for employers and for redundancy consultation practice.

Usdaw’s General Secretary, John Hannett, said: ‘I am absolutely delighted with this decision. It has corrected the clear injustice of denying compensation to staff purely on the basis of the number of employees at each individual store.’

Solicitors Slater and Gordon, who represented Usdaw at the hearing, said in a press release that ‘a legal loophole that left thousands of British workers vulnerable to redundancy without fair consultation has now been closed.’

It has since been reported that the Department for Business, Innovation and Skills (BIS), which was named as a respondent in the Woolworths case, views the EAT judgement as ‘unwelcome’ and has requested permission to appeal. Judge Jeremy McMullen remarked on the fact that no BIS representatives attended the EAT proceedings.

A BIS spokesperson told online HR magazine Personnel Today: ‘We have applied for permission to appeal and are waiting for a decision ... . We think the EAT has got the law wrong and it is our view that the decision will have wider implications.’

Guidance sought from the European Court of Justice

In a related development, it was reported in the Official Journal of the European Union (699 KB PDF) on 29 June 2013 that an industrial tribunal in Northern Ireland had referred a similar case to the European Court of Justice (ECJ) for a preliminary ruling in case C-182/13. The case, Lyttle and others v Bluebird UK Bidco 2 Ltd, involves the same issue as the Woolworths case, of whether the obligation to consult only arises when 20 or more employees are affected by redundancy in a particular establishment, or when at least 20 redundancies are proposed across all of an employer’s establishments.

In a decision that pre-dated the EAT’s ruling on the Woolworths case, Northern Ireland’s industrial tribunal referred a series of questions to the ECJ:

  • the correct interpretation of the term ‘establishment’;
  • whether the term ‘establishment’ can include ‘an organisational sub-unit of an undertaking which consists of or includes more than one local employment unit’;
  • whether the phrase ‘at least 20’ refers to the number of dismissals across all of the employer’s establishments, or to the number of dismissals per establishment.

Commentary

These two cases may result in a significant strengthening of UK law on redundancy consultation. Changes to the law were made by the government as recently as April 2013 (UK1301019I) to lessen employers’ consultation obligations, but the outcome of these cases may well undermine the deregulatory preferences of the government and employers’ organisations.

The EAT decision in the Woolworths case has serious implications for multisite employers. It means that wherever an employer is proposing to make 20 or more redundancies in a 90-day period, the duty to undertake consultation would be triggered, regardless of their location.

The EAT judgment is binding on employment tribunals, subject to any appeal and the eventual outcome of the reference to the ECJ in the Lyttle v Bluebird case. It will take some time for the ECJ to issue a ruling but its decision will eventually provide a definitive interpretation of the Directive’s requirements on this point.

Mark Hall, IRRU, Warwick Business School

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