Woolworth’s decision: collective redundancy consultation to be site based

The European Court of Justice (ECJ) has recently delivered some good news for employers whose workforce operates across a number of sites. Since an earlier decision in 2010 there has been much legal debate on the correct interpretation of the law where an employer proposes to make large scale redundancies. The “Woolworths” case saw the issue of the correct interpretation of “one establishment” which rose through our judicial court system.

Background
Where an employer proposes to make redundancies of 20 or more employees “at one establishment” within a period of 90 days or less, the law states that it must consult on its proposal with representatives of the effected employees and also notify the governmental department for Business, Innovation & Skills.

Depending on the number of redundancies proposed, there are minimum time periods for consultation. Failure to comply with any of the rules on information or consultation, or on the election of representatives, can lead to protective awards of up to 90 days’ gross pay. For large numbers, as there were in Woolworths, it is easy to see how this can lead to hefty compensation amounts.

What happened to Woolworths?
When Woolworths went into administration in 2008, Woolworths took the view that “one establishment” meant one individual shop. It, therefore, took the approach that there was no need to collectively consult employees working in shops with fewer than 20 staff. The Employment Tribunal needed to consider the rules on collective consultation and in particular, the meaning of “one establishment”.

The employment tribunal agreed with Woolworths and held that each shop was an establishment and that it did not need to consider the shops nationwide. Consequently, the Tribunal found that the duty to consult was not triggered in respect of those shops with less than 20 employees and the employees were not entitled to protective awards.

On appeal, the decision was reversed by the Employment Appeal Tribunal and it was found that UK law was not in line with the EU Directive.

It decided that on looking at collective consultation you should look at the total number of employees affected in the whole business throughout the UK, and not just one individual shop, store or site. It, therefore, found that Woolworths had not applied the consultation rules properly.

April 2015 – European Court Decision
This decision sparked much debate and shock for employers. However, on 30 April 2015 the ECJ held that “one establishment” does refer to an employee’s workplace rather than the employer as whole.

Comment
This comes as a huge relief to employers who will now have more freedom to restructure their workforce without having to face additional consultation obligations as can now look at redundancies in one site rather than having to consider its business plans across the whole company nationwide.

This content is correct at time of publication