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Collective Redundancies Update

Under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), employers have a duty to consult with appropriate representatives of employees concerning forthcoming redundancies if 20 or more employees are to be dismissed ‘at one establishment’ within a 90 day period.

In a landmark decision, the Employment Appeal Tribunal (EAT) has ruled that the words ‘at one establishment’ should be deleted from the Act in order to give effect to EU Council Directive 98/59EC, which it is intended to implement (USDAW v WW Realisation 1 Ltd.).

The issue arose following the collapse of retail chain Woolworths, which went into administration in 2008 with the loss of nearly 30,000 jobs. The company’s administrators had failed to consult union representatives before making staff redundant. When a claim was made on behalf of the employees for a ‘protective award’, the Employment Tribunal treated each store as if it was a separate establishment. It therefore awarded employees who had worked at locations with 20 or more employees a protective award of 60 days’ pay but those who had worked at locations with fewer than 20 employees were denied a protective award. The sole issue before the EAT was whether or not this exclusion was correct.

The wording of the relevant Article of the Directive differs from the domestic provision in that it refers to at least 20 employees made redundant ‘over a period of 90 days…whatever the number of workers in the establishments in question’.

The EAT interpreted the Directive as imposing no site-based restriction. Nor could it find any mention of the words ‘at one establishment’ in either the reports of parliamentary discussions prior to the introduction of the domestic legislation or in the explanatory notes, so concluded that the limitation was not regarded as ‘fundamental to the policy of the legislation’.

The EAT therefore held that the words ‘at one establishment’ should be deleted from TULRCA Section 188 in order to comply with the Directive. The claimants are therefore entitled to a protective award as a result of Woolworths’ failure to consult over the proposed redundancies.

This decision makes a significant change to the collective consultation obligations of employers, who must now consult when 20 or more employees are to be dismissed as redundant from the business as a whole. This will include situations where employees’ original contracts of employment are terminated and new contracts are offered on revised terms.