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UK: Collective Consultation in the spotlight

29/07/2015

The scope and effectiveness of collective consultation, particularly in redundancy situations, has been in the spotlight recently both in the UK and across the EU.

The impact of collective consultation in the UK is generally not as broad reaching as in other EU countries. This is on the basis that the UK does not have works councils and that private sector UK employers are often not unionised or have standing committees of employee representatives. Further, the legal requirements of collective consultation are only triggered in particular situations, notably on large scale redundancy exercises, business transfers and outsourcings and changes to pension arrangements.

However, for the past two years UK employers have faced a state of uncertainty with regard to collective redundancy consultation. This is due to the progress of the combined cases of USDAW v Ethel Austin Ltd and USDAW v Unite the Union and WW Realisation 1 Limited, the facts of which arose from the insolvency of one of the UK’s largest retail chains, Woolworths. The issue at the heart of this case was when the duty to consult was triggered and, in particular, what the wording ‘at one establishment’ meant in the UK legislation. The outcome of these cases had significant implications for employers, both in terms of the practical aspects of carrying out multi-site redundancies and the costs implications of getting it wrong.

Article 1 of the Collective Redundancies Directive gives member states 2 options for what triggers collective consultation. The option chosen by the UK states that the duty arises where the number of redundancies is ‘over a period of 90 days, at least 20, whatever the number of workers normally employed in the establishments in question’. The UK implementing law states that ‘where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals’. There has been debate over whether the UK legislation properly implements the Directive as well as the meaning of the term “establishment”, which is the issue that came to a head in the Woolworths case.

Historically UK courts have interpreted ‘establishment’ as being the business unit to which an employee is assigned. However, in a bold decision in 2013 the UK Employment Appeal Tribunal concluded that the words “at one establishment” should be deleted in order to comply with the Directive. This widened the scope and led to a situation where employers would be required to collectively consult if dismissing 20 or more employees regardless of the part of the business for which they worked. This decision was appealed and in April the CJEU held that there was nothing in the Directive which stopped the UK legislating that collective consultation obligations were only triggered when 20 or more redundancies were proposed at a single establishment, being the local unit where they are assigned to work, rather than across the whole undertaking of the employer. Whilst the CJEU’s decision has been welcomed by multi-site UK employers it is seen as a blow to employees and the unions.

Separately, two public consultations have been reviewing collective consultation requirements. In the first the UK government is seeking views from stakeholders on how suitable the UK law on collective consultation is for insolvency situations. Following discussions with clients CMS has submitted a response to the government in which it highlighted the conflict between the collective consultation requirements and the need of insolvent businesses to reduce staffing levels without delay. Whilst reform in this area is desperately needed our research found there are differing opinions on how this could be achieved. Views expressed included that whilst a system based on minimum requirements may lack flexibility, a more liberal approach may be open to abuse. There was greater support for widening the scope of the defence for failing to comply with the collective redundancy consultation requirements and, in particular, for making insolvency a “special circumstance” in which it is
recognised employers may not be able to comply. However there are concerns about how this would be achieved whilst still adhering to European law.

Secondly on 10th April the European Commission launched a public consultation with the Social Partners (representatives of employers and employees) on the consolidation of the three key directives covering collective consultation – the collective redundancy directive (98/59/EC), the transfer of undertakings directive (2001/23/EC) and the general framework for informing and consulting employees directive (2002/14/EC). The aim of the consultation is to strengthen the coherence and effectiveness of existing EU legislation on worker information and consultation at national level. The public consultation concludes on 30th June 2015.

In conclusion, whilst the general position on collective consultation requirements in the UK seems to have settled for the time being it is an area ripe for further change.

Authors

Picture of Sarah Ozanne
Sarah Ozanne
Of Counsel
London