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15 October 2013

Collective redundancies and TULRCA – the duty to consult

Under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), employers have a duty to consult with appropriate representatives of employees concerning forthcoming redundancies if 20 or more employees are to be dismissed at one establishment within a 90-day period.

In a landmark decision, the Employment Appeal Tribunal (EAT) has ruled that the words ‘at one establishment’ should be deleted from the Act in order to give effect to EU Council Directive 98/59EC, which it is intended to implement (USDAW and Another v Unite the Union and Others).

The issue arose following the collapse of retail chains Woolworths and Ethel Austin, which went into administration in 2008 and 2010 respectively. Through their respective unions, the employees who lost their jobs claimed that there had been a breach of the duty to consult over the redundancies.

Their claim was upheld and the Employment Tribunal (ET) awarded employees who had worked at locations with 20 or more employees a protective award – 90 days’ pay for employees of Ethel Austin and 60 days’ pay for employees of Woolworths. However, those who had worked at locations with fewer than 20 employees were denied a protective award. More than 4,000 employees who were thereby excluded from the payments awarded to their colleagues challenged the ET’s decision.

The sole issue before the EAT was whether or not the exclusion from a protective award of those made redundant at establishments where fewer than 20 employees were dismissed was correct.

The wording of the relevant Article of the Directive compared with the domestic provision is as follows:

Article 1(1)(a)(ii) of the Directive is worded ‘over a period of 90 days, at least 20, whatever the number of workers in the establishments in question’, whereas Section 188(1) of TULRCA is worded ‘20 or more employees at one establishment within a period of 90 days or less’.

USDAW argued that European law imposes no site-based restriction on the number of employees and so, in order to comply with the Directive, Section 188 should be interpreted as requiring the employer to consult where it proposes to dismiss as redundant 20 or more employees from the whole of the relevant business, not from just one location.

The core objective of the Directive was to improve workers’ rights and the cases of the employees denied a protective award in this instance provided a ‘graphic illustration’ of the ‘detrimental effect’ of the failure to implement the Directive correctly.

In reaching its decision, the EAT not only considered the comparative wording of the Directive and Section 188 of TULRCA but also took into account Parliamentary discussions on the introduction of the legislation (as reported in Hansard), case law and the explanatory notes to the Regulations. It could find no mention of the words ‘at one establishment’ and the limitation was not regarded as ‘fundamental to the policy of the legislation’.

The EAT therefore held that the words ‘at one establishment’ should be deleted from Section 188 of TULRCA, in order to comply with the Directive, and the claimants were therefore entitled to a protective award as a result of their employers’ failure to consult over the proposed redundancies.

Surprisingly, the EAT did not consider it necessary to refer the matter to the European Court of Justice.

Meanwhile, having declined to attend, or comment on, the ET proceedings as he had ‘nothing to usefully contribute about the consultation process between the parties’, the Secretary of State for Business, Innovation and Skills has since become involved in the case and been granted leave to appeal against the EAT’s decision.

Jo Davis, partner in the employment law team at B P Collins comments: “If it stands, this decision makes a significant change to the collective consultation obligations of employers when 20 or more employees are to be dismissed as redundant from a business as a whole, irrespective of their place of work.

“This will include situations where employees’ original contracts of employment are terminated and new contracts are offered on revised terms.”

For legal advice on collective redundancies, please contact Jo on 01753 279029 or email employmentlaw@bpcollins.co.uk.

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