June 18, 2013

Employment e-Brief – Larger scale redundancies across multiple sites

The need to consult collectively is triggered when an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less by virtue of section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992.

Over the years there has been considerable debate and case law over the meaning of “one establishment”. The meaning is critical for employers who are downsizing across multiple sites because where an employer fails to comply with the collective consultation provisions, an employment tribunal may make a “protective award” of up to 13 weeks actual gross pay for each dismissed employee. This is in addition to any other compensatory award, notice pay and redundancy payment.

The recent development arose from the insolvency of Woolworths and Ethel Austin. There was collective consultation following the insolvency but only on the basis that each store was treated as a single establishment. This meant it only took place at the stores where more than 20 employees were going to lose their jobs: in the locations where less than 20 were affected, no collective consultation took place.

In the Employment Tribunal which heard the case, this was found to be the correct approach. However, although there is no written judgment for detailed analysis at this stage, it is reported that the Employment Appeal Tribunal (EAT) has overturned this decision. The position now appears to be that there should have been collective consultation with all employees, regardless of the number employed at any one store.

Collective consultation across all sites would have been sensible advice to have given the administrator in any event: after all, if you have time to elect representatives or consult unions at one site, why not do so at all of them? The reason is of course a financial one: the time saving and consequent saving on wages is potentially enormous.

BUT HOW MUCH HAS THE LITIGATION COST?

At this stage we don’t know the full implications of the EAT decision. We have only a short sound bite from the lawyers who acted for USDAW, the shop-workers union, who brought the case. In that it is reported, “once it is proposed that more than 20 employees in a single business are to be made redundant, their location becomes irrelevant.”

This is a decision of potentially considerable significance to multi-site employers, not just from the perspective of redundancies but also in relation to employers making proposals for wide ranging changes to terms and conditions of employment across a multi-site business.

We will report further as soon as we have more detail.

For more information please contact Philip Paget or any member of the Employment Law Team.