On 5th February 2015, many HR professionals, especially in large organisations, were likely to be relieved that the Advocate General’s opinion came out in favour of reversing the Employment Appeal Tribunal’s (EAT)’s view of the meaning of ‘establishment’ when it comes to collective redundancy consultations.

While we will have to wait and see whether the European Court of Justice (ECJ) follows this when they deliver their judgment later this year, the opinion of the Advocate General is often a useful indication of which way the judgment will go and has given hope to many businesses that the collective consultation procedures will be simplified in due course.

Why is this in the news again?

No doubt you will all recall the cases that have led to the need for the opinion and the cases before the European Court: known as the Woolworths case,  USDAW v Ethel Austin Ltd (in administration) & Others. Originally the Employment Tribunal found that the employees at stores with less than 20 employees did not need to be included in the collective redundancy requirements and therefore were not entitled to protective awards as a result of the lack of consultation.

However, the Employment Appeal Tribunal reversed this decision and dramatically changed the law when they found that the ‘one establishment’ wording should be disregarded in a collective redundancy situation.

Therefore, if across the entire business, the number of staff being made redundant within a 90 day period was more than 20, then all of the employees should be included in the collective consultation no matter where they are located or the size of the individual store or unit where they were based. Consequently, if the collective consultation requirements were breached, they would be entitled to protective awards if they were not properly consulted.

In the USDAW cases, this meant that around 4,400 staff in the smaller stores, who were previously believed to be exempt from consultation (because there were fewer than 20 redundancies in the ‘establishment’ where they were employed), were suddenly entitled to compensation in the form of protective awards under the legislation.

This radically changed the accepted position under UK law and added significant complexity and often expense to redundancy exercises for large employers or employers with many different or independent sites. Employers were suddenly required to aggregate redundancies across the whole business to determine whether the collective consultation obligations have been triggered.

This decision has been appealed to the Court of Appeal who referred the matter to the European Court of Justice and so business will eagerly await the next decision. In the meantime, the EAT position remains the correct approach in the UK.

So what is the best way to manage a redundancy situation?

As the EAT’s version of ‘establishment’ is still valid and this will remain the case until the ECJ ruling is made, it remains vital at the outset to establish the number of possible redundancies and employers who have a number of employees across a number of sites will still have to aggregate the numbers affected across all locations to see whether the 20 redundancies in 90 days threshold has been reached.

Where this threshold is met, they will have to ensure that the collective consultation requirements are met in addition to following a fair redundancy procedure.

The key points involved in a redundancy procedure include:

  • Identifying the employees affected. If it is a collective redundancy situation (more than 20 redundancies are proposed within a 90 day period), then the Secretary of State must be notified within the appropriate timeframe
  • Consult with the relevant trade union and/or ensure employee representatives are elected if it is a collective redundancy consultation. Ensure that the representatives are provided with the required information (including details of the number of redundancies, the reasons for them and the proposed method of selection) at the start of the consultation
  • Selection criteria should be identified where some employees will be retained. The criteria must be fair, reasonable and capable of objective justification. For example, qualifications, disciplinary record, timekeeping, length of service etc. The employees affected should be scored reasonably with reference to the agreed criteria
  • Check whether minimum periods of consultation apply. For between 20 – 99 redundancies, the consultation must begin 30 days before the first redundancy dismissal occurs. If 100 or more redundancies are proposed, then the consultation must start 45 days before the first redundancy is made
  • Ensure that the consultation covers ways of avoiding the redundancies and limiting the number. Also it is important to fully consider whether there is any alternative employment available within the organisation
  • Ensure that the individual employees who will be dismissed for redundancy have been properly consulted, informed of the decision in writing and given an opportunity to appeal

In summary, planning remains key for any organisation facing potential redundancies and an early assessment of the numbers involved and early consideration of these issues can help a difficult process and situation run more smoothly.