A recent tribunal decision in USDAW v WW Realisation 1 could form the basis of an appeal challenging the concept of 'establishment' for the purposes of the collective redundancy threshold. A successful appeal could mean that the duty to inform and consult applies to more multi-site employer redundancies.

The obligation to inform and consult on collective redundancies applies only if an employer proposes to dismiss at least 20 employees at one establishment within a 90-day period. Previous Employment Appeal Tribunal (EAT) case law has established that this is incompatible with the EU Collective Redundancy Directive (98/59/EC), which applies the threshold to dismissals at different establishments, but that the incompatibility cannot be cured with a purposive interpretation.

European Court of Justice (ECJ) case law has interpreted the term 'establishment' to cover small business units, even if they:

  • are not geographically separate;
  • do not have legal, economic, financial, administrative or technological autonomy; and
  • do not have their own management that is capable of making redundancies independently.

The rationale is the ECJ's desire to maximise the number of situations covered by the directive, as the cases have come from EU member states that have chosen to use the alternative threshold in the directive based on the percentage of employees in an establishment - the smaller the establishment, the more likely it is that the percentage threshold is met. However, this interpretation of 'establishment' has the opposite effect in the United Kingdom, as illustrated by the recent tribunal decision that Woolworths stores were separate establishments, thereby taking a number of them out of the scope of the duty to consult.

Employers should keep a close eye on any appeal in this case. The EAT authority on interpretation made it pointless for the tribunal to refer the incompatibility issue to the ECJ, and the tribunal also felt bound by the ECJ case law on the meaning of 'establishment' (albeit in a different context). If appealed, the EAT may be able and willing to take a different approach. The case is timely, given that the government is seeking evidence on whether a statutory definition of 'establishment' would be helpful.

For further information on this topic please contact Andrew Brown at Herbert Smith LLP by telephone (+44 20 7374 8000), fax (+44 20 7374 0888) or email ([email protected]).