Developments in the law on Redundancies

Usdaw v. Ethel Austin Limited (In Administration) [2013] IRLR 686 confirms that a “collective redundancy” occurs when an employer proposes to dismiss 20 or more employees at a single establishment within a period of 90 days or less. Section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 provides that an employer must consult about such proposed dismissals. If not, the affected workers are entitled to claim a ‘protective award’. The Act implements European legislation contained in the EC Collective Redundancies Directive 98/59.

 

In Usdaw, the employer failed to so consult and the affected employees (effectively the whole of the employer’s workforce) claimed protective awards. At first instance, the Employment Tribunal held that those employees who were employed at locations where there were fewer than 20 workers were not entitled to protective awards because there was no obligation on the employer to consult under section 188 for that reason. These employees appealed to the Employment Appeal Tribunal (EAT) who held that the requirements of the European Directive were not met on a literal interpretation of the domestic legislation and that in order to interpret the legislation in accordance with the Directive the words “at one establishment” should be deleted from s.188 when construing it. Accordingly the employees who were employed at establishments with fewer than 20 employees were entitled to protective awards based on the number of proposed redundancies in the workforce as a whole rather than at the particular location where they worked.

 

The Secretary of State (who was liable for payment of the protective awards because the employer was insolvent) was not represented at the EAT hearing. He has now applied for leave to appeal and permission has been given for an appeal to the Court of Appeal. Separately, in the case of Lyttle v. Bluebird UK Bidco Limited, an employment tribunal in Northern Ireland hearing a claim on the same issue has referred the matter to the European Court of Justice to rule on whether the domestic legislation in the Trade Union and Labour Relations (Consolidation) Act 1992 properly implements the European Directive. This means that the Court of Appeal in Usdaw is likely to defer judgment until the ECJ has ruled on the matter. It is thus likely to be at least two years before the ECJ and the Court of Appeal rule on the matter, meaning a period of uncertainty for employers on the correct interpretation of section 188. It is therefore unsafe for an employer to rely on the interpretation of s.188 in case law preceding Usdaw, who should take legal advice in dealing with such matters.