Redundant Woolworths staff compensated

In January 2012, unions representing former employees of the collapsed retail chain Woolworths announced that most employees who were made redundant would receive compensation of 60 days’ pay because the company’s administrators had not met statutory consultation requirements. However, a minority who worked in smaller stores will not benefit from the award. The unions plan to challenge the exclusion of these former employees from the compensation award.

Background

On 19 January 2012, an employment tribunal awarded more than 24,000 former employees of collapsed retail chain Woolworths compensation of 60 days’ pay, because the company's administrators had failed to consult unions before making workers redundant.

The case related to former Woolworths employees in England, Wales and Scotland. According to the shop workers’ union Usdaw, the total compensation bill amounts to GBP 67.8 million (€81.2 million as at 5 March 2012).

Woolworths went into administration in November 2008 and subsequently into liquidation (UK0901049I). As a result of the closure of Woolworths’ operations, all of its nearly 30,000 employees in the UK lost their jobs by early January 2009. Two unions, Usdaw and Unite, pursued employment tribunal cases on behalf of their members for a ‘protective award’, alleging that the administrators had failed in their statutory duty to consult with union representatives ahead of the redundancies.

A case brought on behalf of former Woolworths employees in Northern Ireland had previously resulted in a decision along similar lines.

Statutory consultation requirements

Sections 188–189 of the amended Trade Union and Labour Relations (Consolidation) Act 1992 are intended to implement EU Directive 98/59/EC concerning collective redundancies.

UK law requires employers who are proposing 20 or more redundancies at one establishment within a 90-day period to provide relevant information to recognised trade unions or, in their absence, elected employee representatives. Employers are required to consult them about ways of avoiding the dismissals, reducing the number of employees to be dismissed and mitigating the consequences of the redundancies.

Consultation should begin at least 90 days before the first dismissals where 100 or more employees are affected, and otherwise at least 30 days beforehand. Consultation is to be undertaken ‘with a view to reaching agreement’.

Where the required consultation does not take place, unions, employee representatives or employees may complain to an employment tribunal which may make a ‘protective award’, ordering the employer to pay the employees’ usual wages for a period of up to 90 days, depending on the seriousness of the employer’s failure.

Outcome of the case

The tribunal’s ruling (278Kb PDF) upheld the unions’ claim that administrators for Woolworths had not met all the statutory requirements. It made protective awards ordering the company to pay more than 24,000 former Woolworths employees remuneration for a protected period of 60 days. This was less than the maximum possible 90-day award because the company’s administrators had partially complied with the legislation.

The tribunal noted that ‘notwithstanding [a] failure to be more proactive in pursuing a genuine and meaningful consultation process’, the administrators had circulated written information about the redundancies and held one meeting with union representatives at which ‘some dialogue’ occurred.

As the company was in administration at the time of the redundancies, the government’s Redundancy Payments Service is responsible for arranging for the award to be paid, subject to certain financial limits. The maximum amount of money former Woolworths employees will be entitled to receive from the Redundancy Payments Service is up to eight weeks' wages, capped at GBP 400 a week (€478) – a total potential maximum payment of GBP 3,200 (€3,822).

The final payment may be subject to deductions of income tax and national insurance contributions and reductions if the redundant employee received Jobseeker's Allowance and other benefits. Claims for the balance of the award can be made to the liquidators of the company but, in reality, the former Woolworths employees are unlikely to receive any further money. The Redundancy Payments Service believes that the company does not have enough assets to make further payments to former employees.

Smaller branches

Under UK law, the obligation to consult depends on a threshold of at least 20 redundancies in each establishment, not across the whole company, so the protective awards will not apply to some 3,000 former employees who worked in smaller branches of Woolworths, where fewer than 20 redundancies were made.

Usdaw plans to appeal against the tribunal’s decision on this point. The employment tribunal itself considered it was ‘at least arguable’ that ‘potential ambiguity’ in the wording of the Directive ‘might need to be resolved in order to determine what the Directive required or permitted, and hence whether UK law was compliant in this regard’.

Union reaction

Commenting on the outcome of the case, Usdaw National Officer John Gorle said: ‘While the award is never going to fully compensate people for losing their jobs, I’m sure our members will welcome the money’. He expressed ‘bitter disappointment’ that the staff who worked in stores with fewer than 20 employees had been excluded from the award.

He said that this outcome was ‘just plain wrong and shows the gaping loophole and injustice of the current legislation. Nearly 30,000 employees were made redundant from Woolworths at the same time and for the same reason, so to suggest 3,000 of them didn’t constitute a collective redundancy is a nonsense.’

John Hannett, General Secretary of Usdaw, said:

My delight at the award for the vast majority of our members is tempered by the clear injustice that workers in smaller stores could miss out. Usdaw thinks that the UK's current interpretation of the law on collective redundancies is both unfair and possibly a breach of the European Directive which seeks to protect workers in large scale redundancy situations. We are taking further expert legal advice and it is highly likely we will appeal against this part of the judgment.

Mark Hall, IRRU, Warwick Business School

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