The Advocate-General has given his opinion in the long running 'Woolworths' dispute on the meaning of establishment for the purposes of collective redundancy consultation. The EAT had held that the concept of establishment is not relevant to the trigger to collectively consult, with the effect that employers must collectively consult whenever they propose to dismiss as redundant 20 or more employees within a 90 day period, irrespective of where those employees are located. However, the Advocate-General has adopted the more traditional (and employer friendly) approach that establishment means the local employment unit to which the employees are assigned to carry out their duties.

Background

Section 188 of the Trade Union and Labour Relations Consolidation Act 1992 ("S.188") requires an employer to consult collectively where an employer proposes to dismiss by reason of redundancy 20 or more employees "at one establishment" within a 90 day period. There is no definition of "establishment".

S.188 purportedly implements the requirements of the Collective Redundancies Directive (the "Directive") which gives Member States the option of choosing between two 2 definitions of collective redundancy for collective consultation purposes. The first option is linked to a threshold based on overall employee numbers and percentage at risk of redundancy. The second option, chosen by the UK, is: "the dismissal, over a period of 90 days, of at least 20 workers, whatever the number of workers normally employed in the establishments in question".

USDAW v Woolworths and Ethel Austin

Thousands of employees were made redundant when Woolworths and Ethel Austin went into liquidation. The Employment Tribunal found that there had been a failure by the administrators to collectively inform and consult, but only in those stores that employed 20 or more employees. The Tribunal held that each individual store was an "establishment" and so the obligation to collectively consult had not been triggered in those stores that employed less than 20 employees.

The EAT allowed the union's appeal holding that the limitation in S.188 to dismissals "at one establishment" was more restrictive than the Directive. It held that it was possible to interpret S.188 so as to be compliant with the Directive by deleting the words "at one establishment" therefore requiring employers to aggregate all dismissals in the company when assessing whether the threshold for collective consultation was reached, irrespective of where those employees are located. A copy of our previous alert on the EAT decision can be found HERE.

The Secretary of State appealed to the Court of Appeal, which asked the ECJ to consider two key questions:

  • Whether the phrase "at least 20" in the Directive means the number of dismissals across all establishments together, or on an individual establishment-by-establishment basis?
  • If it refers to each individual establishment, what does "establishment" mean? The whole of the relevant retail business, (being a single economic business unit), the part of that business making the redundancies, or the unit where the employee is assigned, e.g. in this case an individual store?

Advocate-General's opinion

Advocate-General Wahl considered 'Woolworths' along with Lyttle v Bluebird UK Bidco 2 Ltd, a Northern Ireland case, and Canas v Nexea Gestion Documental SA Fondo de Garantia Salarial, a Spanish case, which raised similar questions on the meaning of establishment in the Directive.

In the Advocate-General's opinion, "establishment" should mean the same thing, whichever of the two definitions of collective redundancy is adopted, for legal certainty. He referred to previous ECJ decisions, which had interpreted establishment to mean "the unit to which the workers made redundant are assigned to carry out their duties" under the percentages and numbers option (Rockfon A/S V Specialarbejderforbundet I Danmark, acting for Nielse & Ors [1996]] IRLR 168 and Athinaiki Chartopoiia (Athinaiki Chartopoiia AE v Panagiotidis and others C-270/05 [2007] IRLR 284). He considered that there was no good reason to depart from this interpretation.

In those cases, the ECJ rejected the argument that establishment meant undertaking or legal entity, or that it was relevant to consider how the entity was structured internally. The ECJ had focussed on the "local employment unit" recognising that the Directive was seeking to protect the socio-economic effects of redundancies in a local context.

The Advocate-General said that a balancing exercise had to be carried out between the Directive's aim of providing minimum protection with regard to information and consultation where there are collective redundancies, and the Directive's other aim of harmonising the costs to undertakings in the EU of offering that protection. He noted that the Directive does not seek to protect all workers, for example, dismissals that fall outside the relevant time frame would not be covered by the obligation to collectively consult.

Therefore, in his view, there is no requirement to aggregate the number of dismissals across all the employer's establishments. It would be for the national courts to decide, on the facts of the particular case, whether a local employment unit was an establishment. In some cases, an individual store may well be a separate establishment. However, the Advocate-General also gave the example of an employer operating several stores in one shopping centre, which could, depending on the facts, be a single local employment unit. He also said that Member States can, if they wish, increase the minimum level of protection to employees under the Directive so long as the approach taken is more favourable to all workers being made redundant.

Comment

The Advocate-General's opinion is not binding, although it is frequently persuasive, and it remains to be seen whether the ECJ will follow it. If the ECJ follows the opinion (as in our view, it should) this will essentially reverse the position in the UK and shift the focus back to the question of what is the relevant establishment on the particular facts in question. Tribunals will be guided by the principles inRockfon and Athinaiki, and the EAT's decisions in Renfrewshire Council v Educational Institute of Scotland and MSF v Refuge Assurance Plc & Anor, when deciding that question.

Employers who, since the EAT decision, have aggregated all redundancies across the company when assessing whether the obligation to collectively consult has been triggered, would be prudent to continue that approach until the ECJ delivers its decision (and potentially until the matter has been reconsidered by the UK Courts). For employers that have not changed their practice, until we have a definitive decision, the risk remains, but there is at least some comfort that clarity is nigh.