Advocate General Wahl has today issued his opinion in the landmark case of USDAW and Wilson (C-80-/14) and connected cases.

The case (known as the Woolworths case) arises out of the redundancies which followed the insolvent administrations of the Woolworths and Ethel Austin retail chains. It has been the subject of intense scrutiny, mainly because it concerns the question of when an employer reaches the threshold for collective redundancy consultation. In particular, it considers whether, in one of the two alternative definitions of ‘collective redundancies’ in the EU Collective Redundancies Directive (98/59/EC, the Directive), a reference to ‘at least 20’ redundancies over a 90 day period refers either to the number of dismissals across all of the employer’s establishments or to the number of dismissals in each individual establishment.

Key headline

The Advocate General has confirmed that, in his opinion, there is no requirement under EU law for an employer to take account of the number of proposed dismissals across all of its establishments when determining whether the threshold number for collective redundancy consultation has been reached. It is sufficient to determine this by reference to each individual establishment. In other words, it may be possible to treat individual sites or premises as individual establishments for the purpose of determining whether there is a requirement to collectively consult and what period of collective consultation applies, rather than having to 'pool' across different sites and premises (although this will remain fact-dependent).

The opinion will be warmly received by UK employers. It was feared that the opinion might conclude that the UK had incorrectly implemented the Directive and as a result an employer had to aggregate the number of redundancies across all its establishments when determining whether it had to collectively consult with its workforce.

While the opinion is welcomed, it must be remembered that the Advocate General’s opinion is not binding on the European Court of Justice (ECJ). However, in the majority of cases the ECJ has reached the same conclusion as the Advocate General (although sometimes with different legal reasoning). The position will only become certain once the ECJ issues its judgment. Until then and notwithstanding the helpful opinion of the Advocate General, it would be best for employers to continue to disregard the words ‘at one establishment’ when calculating whether they have reached the threshold for collective redundancy consultation.

The key question – the threshold for consultation

Three questions were referred to the ECJ for determination. The most important of these stems from the finding by the UK Employment Appeal Tribunal (EAT) (at an earlier stage in the case) that the UK did not correctly implement the Directive in the way in which it set the threshold number of redundancies at which an employer must collectively consult with its workforce.

The relevant UK legislative provision is section 188 of the Trade Union Labour Relations (Consolidation) Act 1992 (TULRCA). Section 188 requires an employer to consult collectively when it proposes to make 20 or more redundancies at one establishment within a 90 day period. The EAT found that the inclusion of the words ‘at one establishment’ made section 188 inconsistent with the overlying Directive (as these words are not included in the collective redundancies definition in the Directive which TULRCA adopts) and that the words ‘at one establishment’ should be disregarded. The consequence of this is that an employer would be required to consult collectively with its workforce when it proposes to dismiss 20 or more employees across all of its establishments, ie collective consultation would be required more frequently than is currently the case in the UK.

At the time of the Woolworths redundancies, the threshold at which consultation was required was even more of an issue than it is today, particularly where significant redundancies were planned. The minimum consultation period where 100 or more redundancies were proposed was then 90 days. This has since been shortened (from April 2013) to 45 days.

As noted above, the Advocate General has confirmed that, in his opinion, an employer may determine whether the threshold number has been reached by reference to the number of dismissals in each individual establishment and that there is no requirement under the Directive to aggregate the number of dismissals across all of the employer’s establishments when making this calculation.

Second question – meaning of establishment

The second question referred to the ECJ was ‘what is the meaning of ‘establishment?’. The ECJ was also asked (in the connected case of Lyttle and others (C-182/13))whether ‘establishment’ had the same meaning in each of the two alternative meanings of collective redundancies set out in the Directive.

The meaning of the word ‘establishment’ has been considered in a number of EU and UK cases. In each case the question of what constitutes ‘the establishment’ has been very fact specific and therefore has given only limited comfort to employers planning a redundancy exercise. Where there are redundancies across a number of sites, the extent to which the UK courts have held that those sites constitute different establishments has depended on the organisational structure in place and how operationally independent each site is.

The Advocate General’s opinion on this point is that the word ‘establishment’ does indeed have the same meaning in each of the two definitions set out in the Directive. He confirms that ‘establishment’ means ‘the unit to which the workers made redundant are assigned to carry out their duties’ (the finding of the ECJ in the Rockfon case [1996] IRLR 168). He then goes on to state that it is for the national court to determine what constitutes that ‘unit’ in any particular case.

The opinion of the Advocate General here is helpful in that it effectively preserves the status quo (as it was before the Woolworths case) that it is for the UK courts to decide in each case by reference to that case's specific facts whether an employer has correctly identified the ‘establishment’ for the purpose of calculating whether it has reached the threshold for collective redundancy consultation and what period of consultation applies. Going forward, the question of what constitutes an ‘establishment’ will continue to be one which requires careful consideration and, in many cases, legal advice.

Third question – direct effect of the Directive in certain circumstances

The third question referred to the ECJ arises from an argument put to the EAT that the former employees of Woolworths and Ethel Austin should be able to claim directly against the Secretary of State under the Directive (under a principle known as vertical direct effect) for the payment of protective awards. The principle of vertical direct effect only usually applies where a Member State has not implemented a directive by the deadline for implementation.

The ECJ was therefore asked to consider whether a Member State could rely on the fact that the Directive does not give rise to directly effective rights against a private employer in circumstances where: (i)        the Member State’s failure to implement the Directive effectively meant that that employer was not required to make a protective award to an employee for failure to consult in circumstances where it would have been required to do so if the Directive had been properly implemented; and (ii        the employer has become insolvent and the Secretary of State was required to pay to the employee the protective award which would have otherwise been payable by the employer.

In the opinion the Advocate General voices doubts as to whether the arguments in favour of the application of vertical direct effect would succeed in this context. However, he goes on to confirm that, since the point only becomes relevant if the UK has not correctly implemented the Directive (which he does not believe to be the case), he does not view the question as needing an answer and proposes that the ECJ decline to answer this question.

Next steps

As noted above, the Advocate General’s opinion is not binding on the ECJ. However, in the majority of cases the ECJ has reached the same conclusion as the Advocate General (although sometimes with different legal reasoning). The judgment of the ECJ is expected in the coming months. Until then and notwithstanding the helpful opinion of the Advocate General, it would still be best for employers to remain cautious and to continue to disregard the words ‘at one establishment’ when calculating whether they have reached the threshold for collective redundancy consultation.