Collective redundancies: EAT widens obligation to consult

When planning redundancies (which for collective consultation purposes is broad enough to include any dismissal for reasons unconnected with the individual worker – such as a dismissal in order to change terms and conditions) employers should now assume that collective consultation obligations will apply where they are planning to make 20 or more redundancies across the organisation.

Up to now, this duty has only applied where an employer proposes to make 20 or more redundancies “at one establishment”, i.e. there was no duty to consult in respect of establishments with fewer than 20 employees, even where the employer was proposing to make 20 or more redundancies in total across all of its establishments.

The law

The relevant UK law states that there is a duty on employers to consult over collective redundancies where they are proposing to dismiss 20 or more employees at one establishment within a period of 90 days or less. This law was brought in to implement the EU Collective Redundancies Directive. However, the Directive does not appear to require the 20 or more employees to be based at one establishment.

USDAW v Ethel Austin Ltd (in administration) and another concerned appeals to the EAT in two cases involving claims by former employees of the retail chains Ethel Austin and Woolworths, who lost their jobs after the chains went into liquidation. The claims were brought on behalf of the employees by their recognised trade unions for protective awards (an award of up to 90 days’ pay per employee) for failure to consult over collective redundancies. The employment tribunals held that while there had been a failure to consult, the duty only applied to employees at establishments with 20 or more employees. However, the EAT disagreed and accepted the unions’ argument that this was contrary to the intention of the Directive. The EAT said that in order to comply with the Directive, the words “at one establishment” should be deleted when interpreting the UK law.

In a separate Northern Irish case, Lyttle and others v Bluebird UK Bidco Limited, the question of how the Directive should be interpreted has now been referred to the European Court of Justice (ECJ). This case dealt with a similar situation involving claims by former employees of Bonmarche Ltd in Northern Ireland, which became insolvent and went into administration. A restructuring process followed which resulted in the closure of many stores and the claimants losing their jobs. The claimants worked in various stores across Northern Ireland, all with fewer than 20 employees. They brought claims including, again, for protective awards for failure to consult over collective redundancies. The ECJ’s ruling should hopefully provide further certainty on the legal position, as this potentially has significant implications for employers.

Our comments

The EAT’s ruling in USDAW v Ethel Austin Ltd (in administration) and another appears to significantly widen the duty on employers to consult in a collective redundancy situation. Where an employer proposes to make 20 or more redundancies across its organisation as a whole, including at establishments with fewer than 20 employees, it appears that it must now consult representatives all of those employees, including those at the establishments with fewer than 20 employees. This was not previously the case. The ECJ’s ruling will need to be awaited for further clarification of the position. However, in the meantime, to avoid the potential risk of claims, where an employer proposes to make 20 or more redundancies, it should consult all employees, not just those working at establishments with 20 employees or more. Employers will also need to remember that dismissals as part of a dismissal and re-engagement exercise to implement a change in terms and conditions will be covered by the definition of redundancy for collective consultation purposes.

For more information or advice on this issue, or on redundancy generally, please contact Doug Mullen on 0121 212 7432, douglas.mullen@anthonycollins.com or Matthew Wort on 0121 214 3501, matthew.wort@anthonycollins.com.

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