UK: UK Collective Redundancies: What Is an Establishment?

Last Updated: 29 February 2012
Article by Charles Wynn-Evans and Georgina Rowley

If an employer proposes to make 20 or more employees redundant in a 90- day period at one establishment it must consult for a minimum of 30 days with appropriate representatives of the affected employees — and for 90 days if the number of proposed redundancies is 100 or more. But what is an establishment for these purposes? This DechertOnPoint reports on an important recent employment tribunal decision in which this issue was considered [USDAW (1) Unite the Union (2) Wilson (3) -v- WW Realisation Limited (in liquidation) (1) Secretary of State for Business, Innovation and Skills].

The recent employment tribunal decision in relation to complaints of inadequate collective redundancy consultation brought by USDAW and Unite in relation to the demise of Woolworths has attracted considerable publicity as a result of the amounts of compensation involved. The tribunal found that the administrators of Woolworths had not adequately consulted with the relevant employee representatives before dismissing all staff and made a "protective award" of 60 days' pay in respect of each affected employee — the total compensation bill, which will ultimately be met by the Government due to Woolworths' insolvency, is in the region of £67 million. In reaching this decision the tribunal considered the issue of what constituted, in the context of Woolworths' multi-shop business, an establishment — how this issue should be approached is potentially an important point for those conducting redundancy exercises both in the retail sector and elsewhere.

The collective redundancy consultation legislation requires employers to consult collectively with appropriate representatives of the affected employees where 20 or more redundancies are contemplated in a 90-day period. The relevant representatives will either be a trade union — if one is recognised in respect of the affected employees — or, if there is no recognised trade union, suitably appointed or elected employee representatives. The consultation should begin in good time, entails provision to the representatives of a variety of information about issues such as selection criteria, redundancy payments, and alternative employment, and should last for a minimum of 30 days if 20 or more redundancies are proposed and 90 days if 100 or more redundancies are proposed — in either case the extent of the employer's obligations are assessed by reference to its plans over a 90 day period at one establishment.

What counts as an establishment for these purposes is therefore crucial to the issue of assessing whether 20 or more redundancies are envisaged over a 90-day period, such that the obligation to consult representatives arises, and whether the obligation is for 30 or 90 days. As the Woolworths case demonstrates, the penalties for non-compliance are serious, at a maximum of 90 days pay per affected employee and therefore assessing the extent of the consultation obligation is important.

In the context of retail organisations and other businesses with multi-site operations, this issue can be a particularly acute question depending on the size and scale of the organisation — if the entire organisation's network is one establishment for legal purposes, then the collective consultation obligation is all the more likely to arise — and require 90 days' rather than 30 days' consultation — than if each individual site is a separate establishment.

Although this is a fact-sensitive issue, and so the employment tribunal's decision does not create a binding precedent, it is encouraging for retail and multi-site employers that each Woolworths shop was held to be a separate establishment. The basis for this conclusion was the tribunal's finding that each store was a physically distinct premises or set of premises with its own organisation and purpose — to serve customers visiting that store — and that staff were based at a particular store rather than being peripatetic. The tribunal did not accept that any of the employees in question were more closely assigned to any other organisational unit that "transcended" the stores.

This decision can be seen as assisting those retail and other multi-site employers who have similar structures to that operated by Woolworths and wish to argue that each store/site is a separate establishment so as to limit or avoid altogether collective redundancy consultation, for example, when two unconnected geographically separate stores are closed. Whether sites are under separate managerial control, whether operations have separate profit and loss accounts and whether staff are based at one site or are peripatetic will all be crucial factors in assessing what is a question of fact. The issue also needs careful consideration not just from the legal perspective but also in the terms of the broader HR management question of the best way to in which to proceed with consultation over redundancies or restructuring.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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