In a claim for protective awards brought by former Woolworths’ employees, the Tribunal has ruled that each store was a separate ‘establishment’ so the obligation to consult collectively did not apply on the closure of smaller stores where fewer than 20 employees were redundant.
But the Tribunal made substantial awards for the other 24,000 employees from larger stores because of defects in the collective redundancy consultation process. Read on to avoid making the same mistakes and for some interesting insights from the Tribunal on the ‘establishment’ issue …
Where an employer proposes 20 or more redundancies at one ‘establishment’, it must consult with employee representatives and no dismissals may take effect before the end of the applicable minimum consultation period (30 days, or 90 days if 100+ redundancies are proposed). The obligation is triggered when redundancies are ‘proposed’ and consultation must begin ‘in good time’. At the outset of consultation, the employer must also provide to employee representatives certain written information regarding the redundancy proposals (known as a ‘section 188 letter’).
There is a potential defence to claims for failure to consult if there were ‘special circumstances’ which made full compliance impossible but, even then, the employer must still do what it can to inform and consult.
Woolworths went into administration on 27 November 2008. Initially, the administrators were focussed on trying to find a buyer for the business but, in a communication to staff on 9 December, they confirmed that redundancies were possible if a buyer could not be found.
The union official contacted HR and the administrators several times from around mid-November but little information was forthcoming. He even offered to enter into a confidentiality agreement to protect commercially sensitive information regarding the sale negotiations but this offer wasn’t taken up and no consultation took place until an ‘information and consultation meeting’ on 16 December.
Only one hour was set aside for the meeting and some 40 to 50 employee representatives from around the country participated in the meeting by telephone conference. At the meeting, the administrators announced that no buyer had been found and that all stores would close between 27 December and 4 January. There was then an opportunity for questions and answers but there was little meaningful dialogue partly because of difficulties with the telephone line. The administrators then sent the ‘section 188 letter’ to the employee representatives on 17 December.
The Tribunal’s decision
Meaning of ‘establishment’
The Tribunal made protective awards in favour of most of the redundant Woolworths employees but not for those working in stores with fewer than 20 employees as each store was ruled to be a separate establishment.
After considering the various European and UK cases, the Tribunal concluded, on the facts, that employees were more closely assigned to individual stores than they were to a national organisational structure. Relevant factors included that:
- each store was a physically distinct premises;
- each store served its own customer base in its area;
- each store had its own resources to operate independently;
- each store had its own organisation, headed by a Store Manager;
- employees were assigned to particular stores; and
- employees were not subject to contractual mobility clauses and were not routinely moved between stores.
The Tribunal found a number of defects in the collective consultation process conducted by the administrators, as follows:
- The financial problems were ‘special circumstances’ justifying a shorter consultation period but consultation should have started earlier. The duty to consult was triggered as soon as it became apparent that a quick sale was not likely i.e. some time before the 9 December announcement to staff.
- The ‘section 188 letter’ should have been provided when the duty was first engaged and before the first consultation meeting. If necessary, the information could have been updated as time went on and as consultation progressed.
- There was no meaningful consultation. At the 16 December meeting, the administrators made announcements and answered questions about what was going to happen but did not conduct open-minded dialogue. Updates were circulated at intervals after the meeting and the ‘door was open’ for the representatives to make suggestions but no further meetings were held.
- The arrangements for the (one and only) meeting were not conducive to proper consultation. In particular, the meeting was too short and the large number of telephone participants made effective consultation impossible.
- The confidential nature of sale negotiations did not excuse the failure to commence consultation with the unions. Confidentiality agreements could, and should, have been explored.
Although the Tribunal acknowledged this was not a case of a total failure to consult, it considered that the numerous defects amounted to a ’substantial serious failure’ to comply with the duty to inform and consult and made awards of 60-days’ pay per employee.
Although decisions of employment tribunals are not binding in other cases, this decision is a good example of how tribunals approach these issues in practice.
Of particular interest for members are the Tribunal’s comments on the issue of ‘establishment’. Although there will still be cases where, on the particular facts, an ‘establishment’ will cover more than one geographical location, in other cases, it will be possible to treat different business locations as separate establishments (even when conducting a nationwide redundancy programme) and so avoid collective consultation or reduce the number of redundancies per establishment so that a 30-day, rather than a 90-day, consultation period applies.
This case also emphasises the importance of commencing consultation early and, in appropriate cases, engaging with unions on a confidential basis even before consulting more widely.
Proactive engagement in the consultation process is essential and one meeting will never be enough. It is not sufficient to simply provide information and leave it to employee representatives to come forward with suggestions. Regular meetings should be scheduled throughout the consultation period to explore all issues on which consultation is required – see the example of a typical 30-day consultation process in our Redundancy Toolkit.