Collective Redundancy: Definition of Establishment

Former employees of Woolworths have successfully brought an action for its failure to inform and consult in connection with a collective redundancy procedure.

The Employment Tribunal concluded that when Woolworths went into administration in November 2008, and subsequently dismissed its employees by reason of redundancy, it failed to comply with its legal obligation to inform and consult collectively. In summary, the statutory requirements are:

• when proposing to dismiss 100 or more employees at one establishment, within a 90-day period, an employer must begin its consultation at least 90 days before the first dismissal takes effect; and
• when proposing to dismiss between 20 and 99 employees at one establishment, within a 90-day period, an employer must begin its consultation at least 30 days before the first dismissal takes effect.   

Woolworths attempted to argue that “special circumstances” existed which meant that it was not reasonably practicable for it to comply with its collective consultation obligations. Those circumstances included its financial position at the time and its requirement to keep such circumstances confidential so as not to deter potential buyers of the business.  It contended that the special circumstances discharged it from its obligation to consult collectively.  However, this was rejected by the Tribunal as it concluded that it is a well-established principle, derived from case law, that insolvency will not amount to a special circumstance justifying a failure to inform and consult.

The Tribunal therefore upheld the complaints of failure to inform and consult and granted the protective award to the affected employees.  However, the Tribunal noted that although there was a “substantial serious failure to comply” with consultation duties, taking into account the seriousness of the default, the just and equitable compensation in the circumstances would be 60 days’ pay per affected employee - lower than the maximum award of 90 days’ pay.

However, in assessing who would be entitled to any protective award, the Tribunal needed to clarify what constituted a “single or distinct” establishment, in accordance with the legal definition.   The unions and employee representatives argued that the “whole of Woolworths’ operations nationwide constituted a single establishment”, and, as such, all employees would be entitled to the award.   However, Woolworths successfully argued that each individual store was a separate establishment. 

In coming to its conclusion, the Tribunal concluded that each of the individual stores had its own organisational structure and was headed by its own store manager, distinct from the management and organisation of other stores and distinct from Woolworths’ national retail operations. Another consideration was that each of the relevant employees worked at an individual store and were not asked to work at other stores.

This is an important point as a number of those employees were employed at stores with fewer than 20 employees. As a result, those employees would not be entitled to the protective award, as there was no obligation on Woolworths to consult collectively with those employees.  

In spite of this ruling, it should be noted that cases of this kind will always turn on their individual facts. Employers should always consider how the collective consultation obligations are capable of applying to their own organisations. It is not yet known whether the employees’ Union intends to appeal this decision.

For more information see: http://www.judiciary.gov.uk/Resources/JCO/Documents/Judgments/usdaw-v-woolworths.pdf