The decision overturns a previous ruling that saw shopworkers employed in stores with fewer than 20 staff denied a payout when the Administrators failed to consult with the staff’s representatives, which they are obliged to do when a business goes into administration.
Employment law experts have now warned that the decision could have major ramifications on companies in the UK, as well as much wider implications. The ruling involves the rewriting of UK laws to comply with EU directives – legislation that has been in place for over 20 years.
Michael Ball, Employment Partner at law firm, Gateley, said:
“The general impact of this ruling going forward, will be huge for employers with multiple sites, especially in the retail sector.
“In any 90 day period, if 20 or more employees are affected by redundancies, it will not matter that they are based at several different locations – any potential dismissals will have to be subject to formal collective consultation for the relevant period, with appropriate representatives, prior to being implemented.”
“This will clearly cause a considerable increase in costs for employers and there is the risk of substantial ‘protective awards’ for those who fail to comply.”
This ruling will now mean that the affected staff at Woolworths will be entitled to up to eight weeks pay and at Ethel Austin up to 12 weeks’ pay.
Commenting on the ruling, John Hannett, Usdaw General Secretary, said:
“I am absolutely delighted with this decision. It has corrected the clear injustice of denying compensation to staff purely on the basis of the number of employees at each individual store.
“It did not make sense that staff in Woolworths and Ethel Austin’s smaller shops were not part of the same collective redundancy situation as their colleagues in larger stores. So you could have the ridiculous situation where 21 employees in one store were compensated for the lack of consultation whereas 19 staff in a store nearby received nothing.”
“Tens of thousands of retail workers have been made redundant in the last four to five years and, while the Administrators have taken their large fees, many workers were not only treated shabbily but denied the additional payment based on the ‘failure to consult’.”
Mr Hannett went onto say:
“This decision will send a clear message to all employers and Administrators that workers should be consulted regardless of whether they work in a small or large workplace. Usdaw will also continue to press for a change to the law that currently allows Administrators to ignore their consultation obligations to employees when a company goes into administration. There are currently no consequences for Administrators for failing to consult with employees and if subsequently a compensation award is made by the Employment Tribunal then the cost of this is met from the government funded Redundancy Protection Fund.
“While our focus has been on achieving a just settlement for our members formerly employed by Ethel Austin and Woolworths, this case has far reaching implications for all workers facing redundancy, whether in the retail sector or the wider economy.”