The UK Employment Appeal Tribunal (the EAT) recently published its judgment in litigation that resulted from the 2008 closure of Woolworths. It confirms initial reports of a significant change to the law on UK collective redundancy consultation.
When a UK employer proposes to dismiss as redundant 20 or more employees, within a period of 90 days or less, it is required to collectively consult representatives of those affected, prior to implementing its proposal. Failure to do so can lead to the employer being required to pay up to 90 days’ pay to each affected employee (a Protective Award).
This obligation arises out of the European Collective Redundancies Directive (the Directive). In implementing the Directive, the UK Government stipulated that the obligation would only be triggered if the proposed redundancies involved 20 or more employees who all worked “at one establishment” within the employer’s organization. UK employers have therefore relied on this for many years as a means of avoiding the obligation to collectively consult when redundancies are proposed across different locations or are otherwise proposed at different “establishments”.
What Has Changed?
The EAT has now held that the words “at one establishment” should be deleted from UK legislation. Why? Because the stated purpose of the Directive is to provide greater protection for workers facing a collective redundancy situation and, in the view of the EAT, without this deletion, UK legislation provides less protection than the Directive requires.
What Does This Mean for UK Employers?
Employers wishing to avoid liability for a Protective Award should now collectively consult when they are proposing to dismiss 20 or more employees as redundant, anywhere in their UK business, within a period of 90 days or less.
Employers will no longer be able to “slice and dice” their UK business into different establishments in order lawfully to avoid the obligation to collectively consult about proposed redundancies.
This marks a significant change to UK collective redundancy practice.
Large employers will be particularly affected, as the obligation to collectively consult will now be triggered even when headcount reductions are proposed independently, by unrelated business units, located across multiple sites. Employers will encounter an inevitable increase in the administrative burden they have to shoulder, not only because of a rise in the number of collective consultation exercises required, but also because of the degree of organization and communication that will in future be necessary to keep track of, and aggregate, disparate redundancy proposals.
Employers should not despair however. The collective redundancy regime remains otherwise unchanged and, whilst employers will now find themselves required to collectively consult more frequently, this judgment does not require collective consultation to take place en masse at one geographic location. Collective consultation exercises can still take place at different establishments if that is a more commercially sensible option. It is worth noting that this change will apply to redundancies that have already been proposed and to those that are on-going.
Please contact your usual McDermott lawyer or Sharon Tan if you would like to discuss the potential impact of this judgment on any current or future redundancy exercises proposed by your business.