In Pujante Rivera v Gestora Clubs Dir SL and another C-422/14, the ECJ had to decide whether a resignation following a unilateral substantial change to an employee's contract was a redundancy under the Collective Redundancies Directive.
Between 16 and 26 September 2013, the Spanish company Gestora Clubs Dir SL (Gestora) made 10 employees redundant, including Mr Pujante Rivera. During the 90 day period preceding the last of these redundancies, there were a further 22 contract terminations for various reasons. These terminations included a resignation by an employee as a result of Gestora imposing a reduction of 25% in her salary.
Mr Pujante Rivera brought proceedings against Gestora and the Employees Guarantee Fund, alleging that his redundancy was invalid under Spanish law because Gestora had failed to carry out collective redundancy consultation. He argued that, if the terminations that occurred in the 90 day period before and after his own redundancy were counted, the threshold for collective consultation had been reached.
Spanish labour court decision
The Spanish labour court stayed the proceedings and referred a number of questions to the European Court of Justice (ECJ) relating to the interpretation of the thresholds set out in the Collective Redundancies Directive (the Directive), including whether fixed-term workers whose contracts have been terminated because their contracts are temporary have to be taken into account when deciding the number of workers normally employed at an establishment. However, the most interesting question for the purposes of this briefing was whether an employee's resignation in response to an employer's significant unilateral variation of her contract to her detriment amounted to a redundancy for these purposes.
The ECJ held that workers employed under fixed term contracts must be regarded as forming part of the workers normally employed at the establishment.
The ECJ held that the term "redundancy" in the Directive covers the situation where an employee resigns as a result of significant and unilateral changes by their employer to essential elements of their contract of employment, for reasons not related to them as an individual and which are to their detriment. The Directive does not define the concept of "redundancy" but it can be said to include any termination of an employment contract not sought by the worker and, therefore, without his consent. In this case, the worker resigned and so could be said to have consented to the termination. However, the termination arose from the unilateral change made by her employer to her salary for reasons that were unrelated to her personally.
"Redundancy" should not be given a narrow definition for these purposes. Excluding employees from protection under the Directive where their contracts are terminated in circumstances such as these would alter the scope of the Directive and mean that it would not have full effect.
The scope of "redundancy" under the Directive has always been wider than the normal meaning of redundancy; for example, it has long been understood that changing employees' terms and conditions through termination and re-engagement is covered by the Directive, meaning that collective consultation is necessary if the relevant threshold is reached. The ECJ has now confirmed that the definition also includes resignations where an employer unilaterally makes significant changes to an employee's terms and conditions to their detriment, for reasons not related to them as an individual.
Employers contemplating large-scale redundancies or reorganisations will now need to include any employees who resign in these circumstances when calculating the numbers affected.
There have been a couple of other recent pieces of news in relation to collective consultation. First, the criminal prosecution of three former directors of City Link, who were alleged to have failed to notify the Secretary of State that they were planning to make large-scale redundancies, has failed. The directors were found not guilty because they genuinely believed that a sale of the business was not only possible but quite probable, avoiding the need for redundancies. At the time, the maximum fine for a breach of the legislation was £5,000 but it is now unlimited.
Secondly, the Insolvency Service carried out a call for evidence earlier this year on how outcomes from collective redundancy consultation can be improved for employers and employees in insolvency situations. It has recently published a summary of responses, in which it stated that the Government plans to hold further discussions with interested parties to explore how consultation can be improved where collective redundancies are proposed in insolvency or near insolvency situations.