Retales™ - £67.8 million for ex-Woolworths staff

The new year has brought new challenges for the retail sector, with a fresh batch of retailers going into administration. The cost implications of failing to consult over associated redundancies can be huge. The shopworkers union Usdaw has just confirmed it has won compensation of up to £67.8 million for over 24,000 former Woolworths employees made redundant when the retailer collapsed in 2008.

Usdaw reportedly succeeded at Employment Tribunal in its claim that the administrators had failed in their duty to consult collectively before making redundancies. This case is very timely, not only for the retailers that have gone into administration this month, but also for those that are currently struggling and considering store closures.

The former Woolworths employees are now, reportedly, in line for 60 days' pay. However, not all employees will receive compensation, as it would appear that Usdaw was unsuccessful in its attempts to get protective awards for employees employed at stores with less than 20 staff.

Usdaw has stated that it is highly likely that it will appeal against this part of the judgment. The duty to consult collectively about redundancies is triggered where an employer is proposing to dismiss as redundant 20 or more employees at 'one establishment' within a period of 90 days or less. In this case, Usdaw appears to have failed to persuade the Employment Tribunal that individual stores should not be treated as separate establishments. Usdaw also failed on similar grounds late last year to secure protective awards for employees of Ethel Austin employed at stores with less than 20 staff.

While the Tribunal's decision in this case would accord with previous case law and the general approach taken by most retailers to the 'establishment' test, if Usdaw does appeal this part of the judgment and is successful, it would have wide ranging implications.

Although Woolworths was in administration at the time of the redundancies, and responsibility for the compensation payments rests with the Government’s Redundancy Payments Office, all retailers should take note of the financial implications and Usdaw's potential appeal. Given the number of struggling retailers facing store closures, and Usdaw's repeated challenge to 'store based establishments', this is undoubtedly an area to watch.

For further advice on collective redundancy consultation, please contact Nick Thorpe, Partner (Employment and Pensions Group). Further updates on this case will also be available on our Employment Law Blog.