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Collective redundancy consultation
[ch 11: pages 369-370]An employer has a legal duty to consult over collective redundancies if it proposes to dismiss as redundant 20 or more employees at one establishment within a 90-day period. This law is set out in Chapter II (section 188 onwards) of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). In Northern Ireland the same rules are contained in Part XIII of the Employment Rights (Northern Ireland) Order 1996 (article 216 onwards).
Under section 188 of TULRCA, to trigger the duty to consult collectively, the 20 or more employees at risk of redundancy must all work at one establishment.
The European Court of Justice (ECJ) has confirmed that “establishment” refers to the business unit where employees are assigned to work, even if that unit does not have a management capable of carrying out collective redundancies. It need not be a separate legal entity, as long as it is a distinct and stable entity with its own workforce.
This is the unsatisfactory conclusion of legal proceedings brought by retail union USDAW, following the collapse of high street retailer Woolworths. It means that employees based at smaller business units where fewer than 20 employees work have weaker redundancy consultation rights than those working in larger units, even though they share a common employer and the redundancy concerns they face are exactly the same:
USDAW won protective awards for thousands of affected employees after the collapse of the Woolworths and Ethel Austin retail chains when administrators failed to consult with the union before shutting the stores. However, 4,500 employees at stores with fewer than 20 employees got no protective award because under UK law, collective consultation obligations are triggered only where 20 or more redundancy dismissals are proposed within a 90-day period at one establishment. Each store was treated as a separate establishment. USDAW took a tribunal claim on behalf of the workers, which was fought up to the level of the European Court of Justice (ECJ). USDAW argued that the UK’s “establishment” test was in breach of the Collective Redundancies Directive.
USDAW’s case was that there should be collective consultation whenever 20 or more employees sharing the same employer are at risk of redundancy, no matter where in the business they are based. Confining collective consultation duties to establishments that happen to have 20 or more employees based there produces arbitrary and unfair results. Especially where, as in the Woolworths example, a large retailer closes nearly all its stores, the same redundancy risks and concerns are faced by everyone affected, all of whom have the same need for collective consultation and representation, irrespective of the size of each store. It made no sense, said USDAW, to limit protection to large stores and to deny consultation rights to those working in the smaller outlets.
The ECJ refused to rule in USDAW’s favour. An establishment, for the purposes of collective consultation, said the ECJ, is the business unit where the employee is assigned to work.
USDAW v (1) WW Realisation 1 Limited (in liquidation) (Woolworths); and (2) Ethel Austin Limited, Secretary of State for Business Information and Skills Intervening, Case C-80/14 [2013] IRLR 686
The TULRCA provisions on collective redundancies do not apply to Crown employees (those working for a government department or carrying out its functions). However, civil servants have consultation rights under their civil service redundancy policy.
The definition of redundancy dismissal for the purposes of collective consultation is wider than the statutory definition for individual redundancies in section 139, ERA 96, set out at the start of this chapter. The duty to consult collectively will be triggered by any “dismissal for a reason not related to the individual concerned”.
Even if there is no statutory duty to consult over collective redundancies because fewer than 20 employees are affected, there must always be individual consultation of those at risk. A failure to consult an individual at risk of redundancy can make the dismissal unfair (see Chapter 10: Dismissal).
The employer’s statutory duty is to consult collectively in good time about ways of avoiding dismissals, reducing the number of employees to be dismissed, and mitigating the consequences of dismissals (see below: The subject matter of collective consultation).