At the end of April, the European Court of Justice (ECJ) gave its judgment in the long-running saga concerning the closure of Woolworths and Ethel Austin stores. The judgment is good news for employers as it limits the operation of the rules on collective redundancies.

Under GB law, where an employer is proposing 20 or more redundancies at one establishment within a period of 90 days or less, the employer must consult with appropriate representatives (such as a trade union) of employees who may be affected by the proposals, or measures connected with them. The obligations derive from the EU Collective Redundancies Directive.

Many store employees were made redundant as a result of the closure of the Woolworths and Ethel Austin stores and their union, USDAW, brought tribunal claims for alleged failure to comply with the collective consultation rules.

The tribunals that heard the claims found that employees could not succeed with their claims, because they were at an “establishment”, i.e. a store that had fewer than 20 employees. This decision was reversed on appeal and the case eventually reached the ECJ.

USDAW claimed that the rules in the UK did not comply with the Directive in that the obligation should be triggered if the redundancies proposed are 20 or more within the employer, rather than within an establishment. Even if that were not so, they argued, “establishment” should mean the whole of the retail business of the employer rather than individual stores.   

The ECJ rejected USDAW’s claims. The correct test is to look at each individual establishment rather than the legal employer. Although the definition of “establishment” may sometimes lead to uncertainty, in essence it means the unit to which an employee is assigned. A separate “establishment” does not need to have complete autonomy nor does it need to have its own management function capable of handling the redundancy exercise.

The Woolworths case is going back to the Court of Appeal which will need to decide whether individual stores amount to separate establishments. In the light of the ECJ finding, it is highly likely that it will decide that they are separate establishments and so reinstate the original tribunal decision. The impact of the decision is that employees working at small units of large, national employers may not have the same consultancy rights during redundancy processes as their colleagues working in larger units.