Employees at failed retailer, Woolworths, have won a landmark legal case, entitling them to a £5 million redundancy payout.
The shop workers will share the multi-million pound compensation with ex-Ethel Austin employees, after trade union, USDAW, successfully challenged UK legislation that only requires collective consultation where there are 20 or more redundancies at one establishment within a period of 90 days. As a result of the Employment Appeal Tribunal ruling, shop workers in the smaller stores are entitled to ‘protective awards’, after being denied redundancy compensation when the high street chains went bust. Employment law experts have now warned that the decision could have significant 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 forwards 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.”
In USDAW and others v WW Realisation 1 Ltd (in Liquidation) and another it was argued that the European Directive refers to 20 or more redundancies at 'establishments' rather than the singular 'establishment' within a period of 90 days. Therefore, the European Directive requires collective consultation in circumstances where there are 20 or more employees made redundant in total across all the employer's sites. Ball added: “This will be an extremely controversial decision, given the drive against red tape, and it would appear that an appeal is almost inevitable. “The UK is the only country to have implemented the EU Collective Redundancy Directive – the 20 threshold – in this manner. This decision means that UK businesses may find that they are at a significant disadvantage in comparison with other EU-based companies, as they will be subject to even greater regulation. The ruling is also somewhat ironic, given that it has come on the same day that William Hague announced that the UK should have ‘red card’ power to allow the UK to stop EU laws applying in certain cases.”
In the Woolworths case, the EAT held that the UK legislation does not adequately implement the European Directive. In order to rectify this, the reference to ‘establishment’ in the national legislation has been omitted when interpreting the Act. There is already a precedent for such a move, in relation to the previous laws on disability discrimination and protection by association, as well as the current Working Time Regulations and the right to carry over annual leave for sick employees.
