The Court of Justice of the European Union (“CJEU”) has today given its decision in the case of USDAW and others – v – Ethel Austin and others, otherwise known as the Woolworths case. The CJEU has decided that, in determining whether collective redundancy consultation obligations are triggered, an employer need only consider proposed redundancies in each of its ‘establishments’ separately, and not all proposed redundancies in aggregate across all sites.
UK law requires that, where an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or fewer, collective consultation must take place prior to the dismissals taking place. During the administration of Woolworths and Ethel Austin, the administrators proposed that thousands of employees across the two companies’ stores throughout the UK would be dismissed by reason of redundancy. Collective consultation took place with the employees in larger stores, where it was proposed that 20 or more employees would be made redundant. However, in the smaller stores, where fewer than 20 employees were affected, the employer did not collectively consult. This was challenged by the employees affected and the trade union, USDAW. They regarded it as unfair that, in the case of mass redundancies where all employees of Woolworths and Ethel Austin were affected, some employees were consulted and others were not, and this depended on the happenstance of the size of the store in which the employees worked.
Claims were brought in the Liverpool and London Central Employment Tribunals. The Tribunals held that the redundancies in each store needed to be considered separately; therefore, in the smaller stores, where fewer than 20 employees were proposed to be made redundant, the collective consultation obligations were not triggered. The employees appealed.
In the Employment Appeal Tribunal, the EAT held that the UK had applied EU law (from which the collective consultation rights originate) incorrectly. The EAT said that it was necessary for an employer to determine how many redundancies it was proposing to make across its whole undertaking, not in each establishment, to determine whether the threshold of 20 proposed redundancies would be met. Clearly, this would result in the threshold being reached much more quickly, particularly in the case of large employers with operations throughout the UK.
The decision was appealed to the Court of Appeal, which referred the matter to the CJEU. The CJEU has decided that the UK has applied EU law correctly. For the purposes of EU law, ‘establishment’ means the entity of an undertaking to which a worker is assigned to carry out his or her duties (in this case, the Tribunals found that the ‘entity’ was each individual store to which an employee was assigned). Furthermore, it was legitimate for the UK to link the collective redundancy consultation triggers to the number of redundancies per establishment, rather than to the employer’s undertaking as a whole.
Effect on Employers
The EAT’s decision in this case constituted a major rewriting of UK collective redundancy law, with an enormous impact on employers, particularly those with many sites across the UK. It will come as a relief to employers that the CJEU has restored the long-established test, meaning that the collective redundancy consultation threshold will be met far less often. However, employers still need to be aware that the test of what constitutes an ‘establishment’ is not, itself, an easy one, and a careful analysis will still need to be undertaken where redundancies are proposed across several sites.