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Collective Redundancy: Definition of Establishment

01 February 2012 #Employment

Former employees of Woolworths have successfully brought an action for its failure to inform and consult, in connection with a collective redundancy procedure.

The Employment Tribunal concluded that when Woolworths went into compulsory liquidation, and subsequently dismissed its employees by reason of redundancy, it failed to comply with its legal duties to collectively inform and consult, namely:

  • when proposing to dismiss 100 or more employees, at one establishment, within a 90-day period, an employer must begin its consultation at least 90 days before the first dismissal takes effect; and
  • when proposing to dismiss between 20 and 99 employees, at one establishment, within a 90-day period, an employer must begin its consultation at least 30 days before the first dismissal takes effect.   

Woolworths attempted to argue that “special circumstances” existed which made it not reasonably practicable for it to comply with its collective consultation obligations, i.e. its financial position at the time (and its requirement to keep such circumstances confidential not to deter potential buyers of the business).  It contended that the special circumstances discharged it from its obligation to consult collectively.  However, this was rejected by the Tribunal as it concluded that it is a well-established principle, derived from case law, that insolvency will not amount to a special circumstance justifying a failure to inform and consult.

The Tribunal therefore upheld the complaints of failure to inform and consult and granted the protective award to the affected employees.  However, the Tribunal noted that although there was a “substantial serious failure to comply” with consultation duties, taking into account the seriousness of the default, the just and equitable compensation in the circumstances would 60 days’ pay, per affected employee.

However, in assessing who would be entitled to any protective award, the Tribunal needed to clarify what constituted a “single or distinct” establishment, in accordance with the legal definition.   The unions and employee representatives sought to argue that the “whole of Woolworths’ operations nationwide constituted a single establishment”, and, as such, all employees would be entitled to the award.   However, Woolworths successfully argued that each individual store was a separate establishment.   In coming to its conclusion, the Tribunal noted that:

“each of the stores was plainly a physically distinct premises...from each of the other stores. Each had its own organisation, headed by its own Store Manager. Each had a distinct purpose .... Each of the affected employees worked at a particular store. They were not peripatetic, nor did their day’s work require them to use their store only as the geographical base or starting or returning point for their activities.”

Therefore, those employees who were employed at stores with less than 20 employees would not be entitled to the protective award, as there was no obligation on Woolworths to consult collectively with these employees.

For more information see:

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