Changes to collective consultation: in depth

22 Aug 2013

You may recall a First to Desk recently which set out changes to the Trade Union and Labour Relations (Consolidation) Act 1992 following the case of USDAW v Ethel Austin Limited (in administration) & another.

By way of background, this case arises from two businesses going into administration with the loss, in total, of 4,000 employees' roles.  The more infamous business affected by this case was Woolworths which, when it went into administration, made over 3,000 roles redundant.

As the employees were spread across many different stores, Woolworths did not collectively consult with any employees unless the store where they had normally worked had more than 20 affected employees.  The vast majority of stores had fewer than 20 affected employees and, therefore, Woolworths did not collectively consult with them.

On the wording of the Trade Union and Labour Relations (Consolidation) Act 1992, this is an entirely understandable approach as the requirement to collectively consult only arises when an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.

At first instance, the tribunal found that each store was a separate "establishment" for the purposes of the Trade Union and Labour Relations (Consolidation) Act 1992 and, therefore, there was no duty to collectively consult in respect of stores with fewer than 20 employees.  The result was that the majority of the redundant employees were not entitled to a protective award.

Unfortunately, whilst the Trade Union and Labour Relations (Consolidation) Act 1992 is very clear that it only applies to dismissals at one establishment; it does not accurately reflect the European Legislation which gave rise to it.  The European Legislation says that collective consultation is triggered when at least 20 workers are dismissed in the establishments in question.

It appears clear that the European legislation never intended to limit the scope of collective consultation to dismissals at one establishment and, as such, the Employment Appeals Tribunal determined that the words "at one establishment" should be removed from the Trade Union and Labour Relations (Consolidation) Act 1992.

The upshot of this is that now, when a company is proposing to dismiss 20 or more employees across their business (no matter where each of employees are based) within a 90 day period, it must collectively consult with the affected employees.  This puts a great burden on larger, multisite employers: will HR teams need to liaise with all other offices before making redundancies in case, in total, there are 20 or more in 90 days?  The answer would appear to be yes.

The administrative burden and the fact that this decision will prevent business acting swiftly to make costs savings is likely to be an unwelcome surprise for employers in an increasingly competitive world market.

BIS confirmed it was seeking to appeal the decision in light of its 'wide and unwelcome implications'.  It seems likely that the right to appeal will be granted and this case will run and run.