Nothing helps you to absorb the practical ramifications of a difficult legal development better than a decent dinner and Chatham House rules.  So earlier this month we hosted senior HR and Legal staff from a number of clients and contacts, all business with multiple sites in the UK and spanning sectors from design to entertainment to financial services.  The least digestible part of the evening was our topic, the havoc prospectively wrought upon multi-sited UK employers making collective redundancies by the Employment Appeal Tribunal’s decision in the “Woolworths” case in May.

We covered a lot of ground in our discussion of the case and the practical difficulties it poses for such employers.  Pending resolution of the appeals now under way, the case has significantly changed the way in which employers should calculate the number of proposed redundancies for collective consultation purposes.  We hope that this summary of the discussion might be of interest to you.  Please forgive its length – a sad but inevitable product of the issues created by the ruling.

1          The prospects of a successful appeal seem limited once it is established that the UK’s collective redundancy consultation laws are inconsistent with the EU Directive on which they are based.  We also saw it as unlikely that the Government would make any move in the short-term to revisit the wording of the UK Statute.

2          The appetite for seeking to comply in full with the logical repercussions of the ruling was limited among our guests, especially where the circumstances giving rise to redundancy proposals varied between sites.  It was felt in many cases that the risk of legal challenge was small.  However, it was agreed that this would depend on the strength, attitude and awareness of any recognised employee representative body in each employer, and that this position could therefore change over time.

3          We reminded ourselves that “redundancy” for these purposes includes not just the traditional reduction in need for employees, but also collective dismissal and re-engagement exercises, especially in connection with effecting changes to terms of employment.

4          Our guests were concerned that the requirement of a minimum consultation period before any redundancies could take effect already leaves potentially affected employees in a state of compulsory limbo, and that the Woolworths decision merely extends the number of people who could be prejudiced in this way.  Behaving decently to the employees at risk was seen as a key factor in preserving the loyalty and faith of those ultimately retained – it was felt in turn that this usually required direct engagement with those at risk employees at an individual level at the earliest opportunity, rather than a process filtered through staff representatives.  This was particularly the case for sites where only a handful of individuals are at risk but where redundancies elsewhere in the company now require formal collective consultation with them regardless.

5          At the same time, while informing and consulting only with individuals directly was recognised to be a breach of the law regarding legal consultation, it was felt that this tactic would significantly mitigate both the likelihood of legal challenge in the first place and the employer’s financial exposure if any such challenge were successful.

6          We considered whether the worst effects of the decision could be addressed by the introduction of a structured redundancy authorisation program.  Under such a system, the employer would, for example, require any redundancy proposed within a fixed 90 day period to be the subject of prior central approval before it could be proceeded with.  Accepting that this could be effective in theory, our guests were of the view that this would be at best a blunt and unresponsive instrument and at worst, substantially unworkable from the administrative perspective.  A similar view was taken of increasing the number of corporate employers within the workforce in order to limit the numbers proposed for redundancy by any individual employer – certainly valid in theory, but potentially carrying such administrative, company secretarial and governance burdens as to make the benefit not worth the effort and cost.

Ultimately the approach to the new decision which was favoured by all our guests, with only limited shades of grey between them, was (in one’s words) to “show no fear”.  Wearing our legal hats, Squire Sanders must enter a note of caution here given that the liabilities for a failure to comply could be significant, but in truth we did find it hard at this stage to recommend any more practical approach for the substantial and geographically disparate employers who attended the dinner.

If you have any queries concerning the legal or practical impact of the Woolworths decision, we would be very pleased to discuss these with you.  Please do let us know.