In USDAW and others v. WW Realisation 1 Limited (in Liquidation) the Tribunal was tasked with determining whether, for the purposes of establishing entitlement to a protective award, individual Woolworths' stores were each an establishment or whether Woolworths' retail operation as a whole was the establishment.
Woolworths was placed into administration on 27 November 2008. In an attempt to comply with employment legislation, the administrators conducted various correspondence with staff and employee representatives including posting a "newsflash" with a warning regarding the company's ability to give employees full contractual or statutory periods of notice in the event it could not continue. On 10 December 2008, the administrators informed staff that if no firm offer for purchase of the business was received, some stores would close before the end of the month.
On 16 December 2008 an "information and consultation" meeting was held involving 50 representatives by conference call and the administrators sent a follow up letter to those representatives on 17 December 2008 purporting to provide the required information under section 188(4) of TULRCA.
No buyer was found and all Woolworths stores closed. Its retail employees were made redundant and the business was placed into compulsory liquidation. The Union and employee representatives brought a claim on the basis that Woolworths had breached its obligations under TULRCA and sought protective awards.
The Tribunal upheld the claim and awarded a staggering £67.8 million compensation. As there was some consultation, the Tribunal ordered that the protective awards be reduced from the maximum of 90 days' gross pay to 60 days' gross pay. The Tribunal also held that each store was an "establishment" thus excluding any store with less than 20 employees from the awards (each store was found to be a physically distinct premises with its own organisation and direct purpose and each of the affected employees worked at a particular store).
The Tribunal also held that Woolworths' financial situation and the fact of administration did not, of themselves, amount to "special circumstances" for the purposes of the "special circumstances" defence under s.188(7) of TULRCA.
Best Practice
It is often very hard in practice for insolvency practitioners to ensure that companies comply with their employment law obligations whilst in administration. Insolvency practitioners have competing duties under employment legislation, the Insolvency Act 1986 and the commercial reality that the business may not have the funds to continue trading to allow proper consultation.
The circumstances have to be out of the ordinary for the "special circumstances" defence to be available and insolvency practitioners should carefully consider each case on its individual facts.
For more information, contact Gareth Edwards on 0117 314 5220.
This publication is for guidance only. Reliance should not be placed upon it and nor should action be taken, without obtaining advice in respect of the specific circumstances applicable. We will be pleased to provide such advice or assistance.
