UK collective redundancy law likely to be reversed

The case, familiarly known as the Woolworths case, came about when Woolworths and Ethel Austin went into administration as a result of the economic downturn and 1200 people were made redundant. The issue arose about whether they should have been consulted with collectively, which involves a minimum period of consultation, and the failure of which can result in protective awards running to many thousands of pounds to the employees. The key was the definition of the word "establishment" – was this each individual premises? Or was it the entirety of the Woolworths chain? If the latter, collective consultation should have taken place – with the possibility of substantial payments having to be made to the redundant staff.

The law affecting collective redundancies has traditionally been interpreted to mean that employers only have a legal obligation to consult staff collectively when they plan 20 or more redundancies in a single establishment (this could include an office, shop or factory unit). However, because employees of both Woolworths and Ethel Austin worked in separate shops with less than 20 staff (total numbers working for the companies were not considered), the administrators did not compensate them.

The Employment Appeals Tribunal in 2013 agreed with the Usdaw union, which presented the case on behalf of the Woolworths and Ethel Austin employees, that a company’s obligation to consult collectively should apply when 20 or more redundancies are planned across a whole company and not separate retail or work units – thus suggesting that an “establishment” comprised the entire company and not the individual work units, i.e. shops in this case. This decision caused some surprise at the time, since it flew in the face of the generally accepted interpretation of when collective consultation obligations arise.

The question referred to the European Court of Justice was for guidance on the definition of the term “establishment” and Nils Wahl, the Advocate General, has now delivered his opinion.

Mr Wahl said that he disagreed with the decision made at the Employment Appeal Tribunal which effectively changed the law regarding collective redundancies.

If Mr Wahl’s advice is followed in the ECJ’s final judgment, which seems likely to be the case, the former pre-2013 law will once again be used in any collective redundancy case.

The previous law was much more sympathetic to an employer’s rights over those of its employees, and the possible law change has already caused anger among trade unions.

The Usdaw union has expressed its disappointment at the Advocate-General’s advice but is optimistically awaiting the final judgement.

John Hannett, Usdaw’s general secretary, said: “It makes no sense that workers in stores of less than 20 employees were denied compensation, whereas their colleagues in larger stores did qualify for the award.

“These were mass redundancy situations where one central decision was made to close the whole company down, with no individual analysis of the viability of each store on a case-by-case basis.”