Why the latest judgment regarding Woolworth and Ethel Austin employees is particularly noteworthy

Pattinson & Brewer employment specialist Paul Statham considers the ramifications of an important case of collective redundancy… 

On the 31 May 2013 the USDAW website carried a news item headed ‘USDAW wins more than 5 million for ex-Woollies and Ethel Austin staff in landmark legal cases’.

The case was a follow-on from cases that USDAW had won in January 2012 relating to the failure of administrators to consult with the recognised trade union prior to making mass redundancies. The staff who worked at Ethel Austin stores and Woolworths stores with more than 20 employees were given 90 days pay and 8 weeks pay respectively as a protective award for the failure by the administrator to consult with the union prior to the redundancies. Employees in workplaces with less than 20 employees did not receive any compensation. In both cases, the administrators had sought to find a buyer for the companies as going concerns, but when this failed they both quickly shut all the stores and made all the staff redundant. As the companies were in administration, the Redundancy Payments Office in fact picked up the liability and paid the protective award to affected ex-employees.

Now His Honour Judge Jeremy McMullen, sitting in the EAT, in a judgment delivered after the hearing (but not yet in writing), has ruled that staff in workplaces with fewer than 20 employees are also entitled to the protective award of 12 weeks pay at Ethel Austin, and 8 weeks pay at Woolworths.

It is understood that the judge has ruled that the words ‘at one establishment’, in section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992, are to be disregarded for the purposes of any collective redundancy involving more than 20 employees. This means that once it is proposed that more than 20 employees in a single business are to be made redundant, then their location becomes irrelevant. If the written judgment confirms this, it will be a very significant change in the law on collective consultation in redundancies.

Section 188(1) says:

“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…”.

Section 188 implements Article 1(a) of the European Union Collective Redundancies Directive 98/59 EC of the 20 July 1998. This provides national governments with two alternative ways in which to define collective redundancies:

(a) ‘Collective redundancies’ means dismissals effected by an employer for one or more reasons not related to the individual workers concerned where, according to the choice of the member states, the number of redundancies is;

(i)                   either, over a period of 30 days

 –    at least 10 in establishments normally employing more than 20 and less than 100 workers

–       at least 10% of the number of workers in establishments normally employing at least 100 but less than 300 workers,

–       at least 30 in establishments normally employing 300 workers or more

(ii)          or, over a period of 90 days, at least 20, whatever the number of workers normally employed in establishments in question.

It is clear that if you compare both wordings, the UK Government has combined parts of each test of what is a collective redundancy by specifying 20 redundancies per establishment over 90 days. It looks like the intention was to adopt Article 1(a)(ii), but there is no reference to the redundancies being per establishment in the directive.  Instead it is a simple total number of redundancies at establishments in question.

In NSF v. Refuge Assurance Plc & Others [2002] IRLR 324 the then President, Mr. Justice Lindsay, held that Section 188(1) cannot be construed to accord with the directive without distorting the meaning of the domestic legislation and so the UK Government was in breach of its requirements under EU law. He did not think it was possible to give the statutory provision a purposive interpretation in order to comply with the directive.  Since that case was decided, the courts have become a lot bolder about their interpretation of statutory provisions in order to make UK law conform to EU directives.  See, for example, the line of cases relating to holiday pay and sickness.

We will have to await the written judgment for full details of the court’s reasoning, but the implications – not just for cases involving redundancies, but also cases involving changes in terms and conditions of employment – could be substantial. This is because the definition of ‘collective redundancies’ in Article 1, means dismissals effected by an employer for one or more reasons not related to the individual workers concerned. This has been held to cover dismissals and re-engagements on new terms. There will have to be collective consultation either with the recognised trade union, or elected workplace representatives whenever the employer is proposing to change the terms and conditions of employment where more than 20 employees in the single business are affected.

It is understood that the appellants’ solicitors were providing a revised wording for the protective award this week and the written judgment would follow shortly thereafter.

It is also understood that as the employer, in each case, was in liquidation, no representatives of the respondent or the administrators were present for the appeal.  Further, the Secretary of State had been joined in proceedings, as the protective award is likely to be paid out of the Redundancy Payments Fund. But, again, the Secretary of State did not participate in the hearing.

It may be difficult for the decision to be appealed in those circumstances.