Partner Sue Dowling, head of our Employment Law team, explains the meaning of "establishment" when proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.
As a reminder... where an employer is “proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, statutory collective consultation requirements are triggered. The required consultation must being in good time and in any event - where the employer is proposing to dismiss 100 or more employees… at least 45 days, and otherwise at least 30 days” before any dismissal takes effect.
The following gives some guidance as to the meaning of “one establishment” for the above purposes and also on how to calculate whether or not the threshold of 20 has been met. Before considering the information set out in this blog, you may wish first to read our earlier blog articles in this series, ‘Are there particular laws relating to procedures to be followed before multiple redundancies are implemented and, if so, in summary what do they provide?’ and ‘What does the trigger “proposing to dismiss as redundant” mean?’.
Where multiple redundancies are planned within a 90 day period, but at each “establishment” the threshold of 20 is not met, there is no obligation under section 188 TULRCA 1992 to carry out statutory Collective Redundancy Consultation.
So what is an “establishment” for these purposes? TULCRA does not provide a statutory definition so the facts of the particular situation need to be viewed in the light of any principles gained through pertinent European and Domestic case law. As each case will turn on its own facts, specific legal advice should be sought and the following only provides some guidance of the factors which are may be relevant.
Part of the difficulty is that case law in this area tends to provide a long list of what may or may not be relevant in deciding if one “establishment” is involved, without providing any determinative factors. The most useful case is probably still that of USDAW and another v Ethel Austin Ltd (in administration) and others – commonly known as the Woolworths’ case. This case went all the way from the Employment Tribunal, to the European Court of Justice and back to the Court of Appeal between 2012 and late 2015 – and essentially looked at the question of whether Collective Redundancy Consultation should have been carried out by the Administrators (when the chains of Woolworths and Ethel Austin became insolvent) before redundancies were implemented at particular stores where less than 20 employees were involved. The ECJ confirmed that one has to consider the unit to which the employees made redundant are assigned to carry out their duties, and that the unit did not need to have management that can independently effect collect redundancies. Accordingly, it found that the Administrators were right to look at the number of employees assigned to individual stores (the “local employment unit”) rather than (as the Employment Appeal Tribunal had found) looking at Woolworths’ business as a whole.
It also appears from case law that to amount to an “establishment”, the business or undertaking does not need to have:
- Any legal, economic, financial, administrative or technological autonomy;
- A management structure/staff which can independently effect collective redundancies;
- Geographical separation from other units and facilities of the undertaking, and
- Does not need to belong to the employing organisation (rather than to a third party).
Each case will turn on its facts but as a starting point, if geographically, the employees are assigned to a ‘local employment unit’, this may be considered to be “one establishment” for TULRCA purposes.
Where you have employees working out in the ‘field’, relevant factors may be whether the employee is assigned to a particular area office or not. If so, the area office may comprise an “establishment”; if not, the organisation’s HQ may be the employing “establishment”, for TULRCA purposes, and considering whether the 20 employee threshold has been reached/exceeded.
“Proposing… to make Redundant 20 or more employees…within a period of 90 days or less”
Having determined the correct “establishment” the next potential pitfall is how to count the number of employees potentially affected correctly.
This may be a simple task in certain circumstances – for example if a particular department at a certain location is identified as no longer needed (due to outsourcing) and that department comprises over 20 employees – Collective Redundancy Consultation will be required.
However the statutory trigger looks at a rolling period of 90 days to see whether an employer’s proposal will result in 20 or more dismissals in any 90-day period. Potential problems consequently tend to arise when an employer is facing a shifting position at his business.
The following examples demonstrate how a shifting demand can complicate whether, and to what extent, an employer must collectively consult:
- An employer identifies in mid-June that he possibly needs to make 35 people redundant by the end of July 2020 – so he commences collective consultation as required by TULRCA.
In early July, he concludes that a further 10 will probably need to be included in the same round of redundancies, to leave at the end of July 2020. Does he have to commence collective consultation in relation to those 10? In principle, this is not required as TULRCA allows the employer to discount those employees where collective consultation has already commenced.
- An employer identifies in mid-June that he possibly needs to make 12 people redundant by the end of July 2020 (so there is no need to commence collective consultation as required by TULRCA) only to find by early July, that his original (genuine) proposal was unrealistic and he concludes that a further 25 will probably need to be included in the round of redundancies, to leave at the end of July 2020.
Does he have to commence collective consultation in relation to the earlier 12 (as well as in relation to the extra 25)? What happens also if those 12 have perhaps already left the organisation or are already working out their notice periods so that any consultation would be too late?
This is more difficult and specialist legal advice should be sought if faced with this type of situation. Whilst some case law may appear to assist the employer in this type of scenario in avoiding having to worry about collective consultation for the first batch of 12 employees, it is not always safe to rely on what a particular case may seem to establish. The employer’s actual thought-processes at the time of the original proposal relating to the first 12 may well come under scrutiny and be identified as differentiating the situation.
- An employer is proposing to dismiss as redundant 19 employees in the next 90 days. He is also proposing to make a further 18 employees redundant with a period of 90 days from the date when the last dismissal from the first 19 is implemented. Can the employer stagger the proposed redundancies so that there are never more than 20 in a particular period of 90 days?
In principle, staggering dismissals is acceptable but, as above, specialist legal advice should be sought particularly since this is an approach which can easily end up being compromised by unexpected developments in the employer’s business within the 90 day period.
What is clear from the above is that an employer would be well-advised to take considerable care at the outset when formulating any potential redundancy proposals to consider fully what realistically the proposal is likely to involve in terms of number of roles/employees potentially affected. Where such consideration, taking a realistic and genuine approach, takes the number of potentially affected employees to 20 or over, the trigger for Collective Redundancy Consultation will apply but at least the employer then has a defined process to follow and in the long-term, may save considerable time and expense by embracing collective consultation from the outset.
The Collective Redundancy Consultation requirements are complex and the financial penalties for failing to collectively consult, when the statutory obligation to do so is triggered, can be substantial.
You may also find our other blog articles on Collective Consultation helpful.
For further information or legal advice, please contact firstname.lastname@example.org or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.