Redundant employees suffer payment setback

Employees at two leading retail chains have suffered a setback in their long-running battle for compensation after the businesses where they worked collapsed.

Nils Wahl, an advocate general at the European Court of Justice, delivered his opinion on 5 February in a case involving more than 3,000 employees at Woolworths and Ethel Austin, along with two similar cases from Spain and Northern Ireland that involved similar issues.

In 2011, the Usdaw union won a protective award for its Ethel Austin members after an employment tribunal if an employer does not inform and consult appropriately about 20 or more dismissals at one establishment in a 90-day period. Both tribunals limited the awards to workplaces where there were 20 or more redundancies.

After Usdaw successfully appealed the decision to limit the awards, the Department for Business, Innovation & Skills appealed the ruling in its favour. The case was then referred by the Court of Appeal to the European Court of Justice.

Mr Wahl’s opinion – which the court does not have to follow – hinged on the “concept of establishment”. He said this denoted the “unit to which the workers made redundant are assigned to carry out their duties”.

But he added that it was for the national courts to decide and there was nothing to stop them from putting in place rules “on the basis of that concept” that were more favourable to workers.

Usdaw general secretary John Hannett said: “We believe advocate general Wahl is mistaken not to take account of the internal structure of companies in giving his opinion and has not considered mass insolvency situations.

“It makes no sense that workers in stores of less than 20 employees were denied compensation, whereas their colleagues in larger stores did qualify for the award. These were mass redundancy situations where one central decision was made to close the whole company down, with no individual analysis of the viability of each store on a case-by-case basis.

“A protective award was made by an employmen<!–>t tribunal and workers in stores of over 20 staff were paid years ago. Justice for the staff in stores of less than 20 employees is long overdue.”

It is anticipated that it will take a number of months for the final European court decision to come through.

The case highlights the importance of correctly following redundancy procedures at every stage of the process. At Palmers, our employment law specialists can provide expert advice on redundancy and related issues to ensure compliance with the law, including on consultation and employees’ rights to statutory redundancy pay. For more information on our employment law services, please contact Lara Murray or Charlotte Woolven-Brown.