The Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) states that, if an employer proposes to make 20 or more employees redundant at “one establishment”, they have to collectively consult in advance of the dismissals. In Usdaw and ors v WW Realisation 1 Ltd (in liquidation) and Ethel Austin Ltd (in administration), the Employment Appeal Tribunal (EAT) held that the duty applied when the employer proposes to dismiss 20 or more employees across the business as a whole.
When Woolworths went into administration at the end of 2008, it made 27,000 employees redundant. The clothing retailer, Ethel Austin, subsequently went into administration in March 2010, making about 1,700 employees redundant.
The shop workers’ union, Usdaw, claimed that both companies had failed to consult over the redundancies in breach of section 188 TULRCA.
Section 188(1) states that “where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals…appropriate representatives of…the employees”.
Decision of tribunals
The two employment tribunals upheld Usdaw's claims and made protective awards in favour of the employees, but only to those who worked in stores employing 20 or more employees. As a result, about 4,400 employees (1,210 at Ethel Austin and 3,233 at Woolworths) lost out on the payments.
Usdaw appealed, arguing that the tribunal should have interpreted the law in line with the core objective of the European directive on which it was based - to improve workers' rights if the alternative restricted them.
The starting point, said the EAT, was article 1 of the Collective Redundancies Directive which gave member states two options for transposing the duty to consult into national law. The UK chose the second option which referred to a period of consultation when there were at least 20 redundancies “over a period of 90 days ... whatever the number of workers normally employed in the establishments in question”.
Both options specified the numbers of people to be dismissed and the number of redundancies (10, 30 and 10 per cent for option one) or 20 (option two). The difference, however, was that option one involved looking at the size of the existing workforce and in which establishments the employees worked. Given that option two did not require that link to be made, the EAT held there was no need to construe “establishment” in any particular way because the duty to consult applied "whatever" establishment they worked in and no “site-based restriction” applied.
As the clear parliamentary intention was to implement the directive, the EAT decided that it was appropriate to disregard the words “at one establishment” in the threshold set out in section 188.
This meant that the obligation to consult in a collective redundancy situation applied when an employer proposed to dismiss 20 or more employees as redundant across the business as a whole. The duty was not limited just to those workplaces within one business where there were 20 or more employees whom the employer proposed to dismiss. The employees who worked in shops with fewer than 20 employees who were proposed to be dismissed were also therefore entitled to a protective award.
This case is hugely significant for trade unions. The obligation to collectively consult applies not only when an employer proposes to dismiss 20 or more employees as redundant in the usual sense, but also when the employer proposes to dismiss and re-engage employees on new contacts. The effect of the decision means that if an employer dismisses 10 workers as redundant at one of their workplaces and then dismisses another 10 in another workplace within a period of 90 days the obligation to collectively consult arises. In unrecognised workplaces the employer would have to keep electing appropriate representatives,in these circumstances which is costly and time consuming. Clearly it would be far easier just to recognise a union.