The Court of Justice of the European Union (CJEU) has today handed down its judgment in conjoined cases which will impact the trigger point when an employer will be obliged to collectively consult with its employees in a redundancy situation. The decision is helpful for employers by heralding a move back to the position when management were obliged to count redundant employees with reference to a local employment unit, rather than across the whole organisation. 

Background 

Between 2008 and 2010 Woolworths and Ethel Austin were forced to close down a large number of retail outlets across the UK as a result of going into administration and then liquidation. Over 28,000 employees were dismissed. USDAW the union was successful at Tribunal in obtaining protective awards for the majority of employees in relation to both employers’ failure to properly inform and consult with employee representatives. However, the Tribunal held that around 4,400 employees were not entitled to protective awards on the basis that, under UK legislation, they worked at retail outlets with fewer than 20 employees (each being a separate “establishment”) and therefore did not have a right to be collectively consulted. 

USDAW appealed the Tribunal decision, and the Employment Appeal Tribunal subsequently agreed with its argument that the term “establishment” in the UK legislation should be interpreted holistically in line with the EC Directive on collective redundancies, so that if the numbers of employees to be dismissed across the employer’s organisation are 20 or more, the duty to collectively consult would be triggered. Our report on the original EAT decision may be found here

The Court of Appeal stayed the Secretary of State’s appeal of this decision, pending the referral of certain questions to the CJEU including with regard to the correct interpretation of the term “establishment”. The Advocate General of the CJEU delivered his initial non-binding opinion on 5th February, supporting the general principle of an employer’s ability to count the number of redundancies at each unit to which workers are assigned to carry out their duties. Our report on the Advocate General’s opinion may be found here.

The binding judgment of the CJEU handed down today followed the opinion of the Advocate General. The CJEU held that there was nothing in the EC Directive on collective redundancies which stopped the United Kingdom legislating that collective consultation obligations were only triggered when 20 or more redundancies were proposed at a single establishment (rather than across the whole undertaking of the employer). While USDAW’s interpretation of the Directive would have brought more employees into scope for protection, the CJEU emphasised the need to ensure comparable protection for workers (and harmonised costs for employers) across the EU. Rejecting USDAW’s interpretation of the EC Directive also had the benefit of avoiding the absurdity of collectively consulting with a single employee at an establishment. 

The CJEU stated that the term “establishment” must be interpreted across the member states as the unit to which workers made redundant are assigned to carry out their duties. The unit may consist of a distinct entity, having a certain degree of permanence and stability, which is assigned to perform one or more given tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks. The unit does not need to have a management that can independently make collective redundancies. It is not required to have any autonomy in a legal, economic, financial, administrative or technological sense. There may be several separate entities across an employer’s undertaking which meet these criteria and qualify as “establishments”. It was now for the Court of Appeal to establish whether the relevant stores at Ethel Austin and Woolworths each qualified as “establishments” under these rules, and the expectation is that it will simply overrule the decision of the EAT. 

Comment 

The CJEU’s decision is very helpful for employers who are dealing with the realities of multi-site redundancies and require clarity in this area. However, further guidance on the precise demarcation of an “establishment” may only be available from the Court of Appeal towards the end of the year.

Click here to see the CJEU judgment.