In my last post I was trying to make sense of 11 pages of densely-worded text in the Employment Rights Bill. For this post I have set myself the easier task of explaining the implications of removing just three words from the law on collective redundancy consultation. 

Clause 23 of the Bill removes the words ‘at one establishment’ from S.188 of the Trade Union Reform and Employment Rights (Consolidation) Act 1992. To understand why this is important we need to look at what S.188 does. 

Section 188 of the 1992 Act provides that when an employer is engaging in a large-scale redundancy exercise, it must first consult with a trade union or other employee representatives with a view to reaching an agreement about ways to avoid, reduce or mitigate the effect of the redundancies that are being proposed. The consultation must start at least 30 days before the first dismissal takes effect – or 45 days where 100 or more dismissals are proposed. A failure to consult in accordance with the statutory requirements may result in those employees who are dismissed being given a ‘protective award’ of up to 90 days’ pay. That award is quite separate from any compensation for unfair dismissal and is intended to be punitive. Employees who have lost nothing at all as a result of being dismissed – who have walked straight into a better paying job and pocketed a redundancy payment – will still be entitled to a protective award if the employer has failed to consult. 

The duty to consult is (currently) triggered by the employer proposing to dismiss as redundant 20 or more employees at one establishment over a period of 90 days or less. Over the years, the courts have had some trouble with the concept of an ‘establishment’. The word is taken from the EU Collective Redundancy Directive which we obviously no longer need to worry about, but it has always been a niggling problem that there isn’t a clear definition of what an establishment is. 

The amendment made by the Employment Rights Bill is prompted by the closure of Woolworths in 2011. The collective consultation procedures were held not to have been followed but not all of the employees were given a protective award. About 4,500 of them missed out because they worked in branches of Woolworths that had fewer than 20 employees. It was held that each branch was an establishment in its own right and so the duty to consult only applied where 20 or more employees were being dismissed from a particular branch. You can see why many people would regard that as an unsatisfactory result. 

The effect of the Employment Rights Bill in removing the words ‘at one establishment’ will be that future closures of multi-site businesses will require consultation whenever the total number of redundancies across the whole business reaches 20 or more over a 90-day period. That would mean that in a future ‘Woolworths’ case all of the affected employees would be included in the consultation, not just those employed at sites of 20 or more.  To that extent we might regard the change as merely closing a loophole. But there are also unintended consequences that large-scale employers are going to struggle with. 

Imagine a nationwide company with sites across the UK. It proposes to restructure the sales team in its Southampton branch with the result that there will be 12 redundancies. The employer will have to behave reasonably in selecting the employees to be dismissed and will have to engage in a consultation process to avoid any findings of unfair dismissal – but the specific duties under S.188 will not apply because the total number of redundancies is less than 20. If at around the same time the company is merging two offices in Wales with the loss of a further 7 jobs then the nothing changes as the threshold will still not have been reached. But if the Aberdeen office then decides to reduce the number of its admin staff then the employer will find that it is proposing to dismiss 20 or more employees. If the dismissals are spread over a period of no more than 90 days then the duty to consult will apply. 

The problem for the employer is that each location is engaged in a completely separate redundancy exercise that may not be coordinated in any way. Does it have to carry out one single consultation exercise or can it carry out three separate ones? What if the 20 employee threshold is only triggered by the last proposal and some dismissals have already taken effect? Does that mean that all the dismissed employees will be entitled to a protective award? Section188(3) says that where consultation has already started in respect of some employees then their numbers are not treated as part of the total. But if the initial proposal was for just 12 redundancies then collective consultation would not have started.  So as a result of an office reorganisation in Aberdeen the employer may find that it has already acted unlawfully. Is that fair? 

These issues could in theory arise under the current law but only if the employer is conducting a series of uncoordinated redundancy exercises at the same establishment. But once redundancies can be aggregated across different establishments in different parts of a business and spread over the whole country, then these are certainly questions that many large employers will need to consider. Some of the case law that follows might lead to some surprising results. 

My suggestion would be an amendment providing that genuinely separate redundancy exercises – not driven by a common underlying business reason – should not be aggregated in this way. The Woolworths loophole would still be closed, but employers would not be caught by surprise when a series of separate redundancy exercises happened to occur within the same 90-day period. 

On the other hand, the Government might well believe that nudging employers towards consultation is a good thing. One consequence of the removal of the ‘at one establishment’ requirement is that large employers may feel obliged to engage in formal collective consultation when they are proposing fewer than 20 redundancies – just in case further redundancies occur elsewhere in the business. I don’t think this Government would see that as a bad outcome.