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Landmark Ruling Overhauls Collective Redundancy Law

A legal loophole that left thousands of British workers vulnerable to redundancy without fair consultation has now been closed, thanks to a legal appeal pursued by trade union Usdaw and legal experts at Slater and Gordon.

The UK’s shop workers’ union has won an important case on behalf of former staff at Woolworths, and in doing so has changed the face of UK redundancy law. Not for the first time, the courts have intervened to correct the wording of domestic legislation to ensure that rights granted by Europe are properly available to British employees.

Usdaw’s legal team have succeeded in acquiring an order effecting a rewrite for all future purposes of the Trade Union and Labour Relations (Consolidation) Act of 1992, which contains the rules for collective redundancy, and in particular, how to count staff to be consulted and compensated.

The European Collective Redundancy directive requires companies within Member States such as the UK to consult with representatives of their staff before making large numbers of redundancies. However, the UK’s version of the rules from the directive added a further limitation which was concluded yesterday by the Appeal Tribunal to unnecessarily restrict the rights of workers in smaller establishments, and was not historically or legally justified.

Therefore when Woolworths became insolvent in 2008 and failed to consult before making 27,000 staff redundant, over 3,000 former employees working in individual shops with less than 20 employees were not awarded the compensation they deserved.

Yesterday, the Appeal Tribunal corrected the UK’s anomaly, and ruled that the words “at one establishment” are hereafter to be disregarded for the purposes of any collective redundancy involving more than 20 employees, meaning that once it is proposed that more than 20 employees in a single business are to be made redundant, their location becomes irrelevant.

The case is a further example of the courts deploying what has become known as the Marleasing rules, which effectively allow a rewrite of UK domestic law to ensure compliance with European requirements and obligations.

Slater and Gordon Employment Lawyer Mike Cain, who represented Usdaw in this case said, “Today marks an enormous shift towards greater protection for employees from large scale redundancies, both from solvent and insolvent companies.

“Thanks to the support and commitment of Usdaw, we have been able to change the law to require companies to consult when making large scale redundancies, regardless of whether their staff work on one large site or several small ones.

“While the current debate about the primacy of EU legislation will undoubtedly roll on, we must ensure that hard-won employment rights do not become a political football.”

Usdaw General Secretary John Hannett said, “I'm absolutely delighted with this decision which corrects a clear injustice against sacked workers. This will send out a clear message to all employers and administrators that workers should be consulted regardless of whether they work in a small or large workplace. It further underlines Usdaw's commitment to pursue important matters of justice and fairness through the courts.”

Mike Cain is an Employment Law solicitor at Slater and Gordon Lawyers in Manchester.

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