May 2015 - The European Court of Justice (“ECJ”) has issued a Judgement clarifying the term “establishment” following a request by the Court of Appeal of England and Wales. The request concerned the calculation method for collective redundancy thresholds that trigger consultation obligations for employers and, more specifically, whether these should be calculated (i) for the employer as an undertaking (i.e., a single economic business unit); (ii) for the retail business of the employer; or (iii) for a single store (part of the employer’s retail business).
The ECJ Judgement (relating to case C-80/14) reaffirms the notion that the term “establishment” used in Council Directive 98/59/EC (the ”Directive”) in connection with collective redundancies is a term of EU law and cannot be defined by reference to the laws of the Member States and must be interpreted in an autonomous and uniform manner across the European Union. The ECJ has clarified that the term “establishment” in the context of collective redundancies is to be understood as the unit to which the employees to be made redundant are assigned in order to carry out their employment duties. In its Judgement, the ECJ also emphasised that under EU labour law the terms “establishment” and “undertaking” are not synonymous. Therefore, a single undertaking may have several establishments (e.g., offices, stores in different shopping centres or different cities, etc.). It is not necessary for a unit to have legal, economic, financial, administrative or technological autonomy in order to be regarded as an establishment.
The Judgement will provide helpful guidance for Bulgarian courts, as this issue is somewhat controversial and allows for different interpretations. The controversy comes from the fact that the Bulgarian language version of the Directive and the Bulgarian Labour Code mix the terms “employer”, “undertaking” and “establishment” and sometimes use them interchangeably.
In practice, the ECJ’s Judgement means that when a single company plans lay-offs in separate stores or offices, the employer may be exempt from the obligation to procure prior consultations with trade unions or employee representatives, as well as from the obligation to notify the Bulgarian Employment Agency and to procure the related procedures. This is the case when these units qualify as separate “establishments”, and thus the lay-offs will not fall within the meaning of collective redundancy.