The European Court of Justice (ECJ) has confirmed in USDAW and another v WW Realisation 1 Ltd (in liquidation), Ethel Austin Ltd and another (C-80/14) (better known in the UK as the "Woolworths" case) that collective redundancy consultation is required only at those establishments where it is proposed to dismiss 20 or more employees.
What was the law prior to these cases?
The EU's European Collective Redundancies Directive provides member states with a choice of two possible definitions of "collective redundancy":
- The dismissal, over a period of 30 days, of at least ten workers in establishments with 21-99 workers, 10% of the number of workers in establishments with 100-299 workers, or 30 workers in establishments of 300 or more;
- 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.
In the UK, section 188 of the Trade Unions and Labour Relations (Consolidation) Act 1992 states that where an employer proposes to dismiss 20 or more employees for redundancy within 90 days at one establishment, then it is obliged to collectively consult the employees through elected representatives. If an employer fails to consult, an employment tribunal may make a protective award of up to 90 days' gross pay for each affected employee.
It has always been the case that, depending on the particular facts, employees working across different sites or locations could usually be deemed to be working at single, separate establishments, so that the collective redundancy obligations did not apply. Failure to inform and consult may result in up to 90 days' pay being awarded to each affected employee as a protective award.
What were the cases about?
Woolworths was a national retail chain employing around 27,000 employees in 814 stores across the UK, which went into administration in November 2008. Ethel Austin, a chain of clothes shops, went into administration in March 2010. After the companies went into administration, stores closed and the employees were dismissed. The trade union USDAW, which represented the employees, sought protective awards on their behalf in respect of the companies' failures to inform and consult under section 188 TULR(C)A.
What was being argued?
A significant shift in the law had taken place with the Employment Appeals Tribunal's (EAT) decision in the "Woolworths" case. Although most of the 27,000 Woolworths employees who were made redundant when the retailer collapsed succeeded in winning protective awards, about 3,300 were employed at smaller stores with fewer than 20 staff. A further 1,200 Ethel Austin employees were similarly affected because they too worked in smaller stores. As each store was defined as a separate "establishment", the original employment tribunal held those employees missed out on the award.
However, the Employment Appeals Tribunal (EAT) held that the existing UK law did not correctly apply EU law. In fact, said the EAT, there was no need to show an employee's "establishment" to determine whether collective redundancy obligations were triggered. This ruling had the effect that collective redundancy obligations applied regardless of whether the 20 or more affected employees were employed at the same or different locations.
The Court of Appeal referred the question to the ECJ. In February this year the Advocate General of the ECJ stated that in his opinion, the UK government had implemented EU law correctly and its interpretation of "establishment" was consistent with the EU Collective Redundancies Directive.
The ECJ has given its final judgment and confirmed that it is not necessary to aggregate dismissals across all establishments for collective consultation purposes.
- The term "establishment" is not defined in the EU Directive but is a term of EU law and cannot be defined by reference to the laws of the Member States and must be interpreted uniformly across the EU. The inconsistent use of "establishment" and "establishments" in different language versions of the Directive is irrelevant to the meaning of the term, and the discrepancy in TULR(C)A's wording does not mean the Directive has been incorrectly implemented.
- Where an undertaking comprises several entities, it is the entity to which the workers made redundant are assigned that is the establishment
- Whilst the Court of Appeal's approach would increase the number of workers protected, it would be contrary to the directive's other objectives of harmonising costs for EU undertakings and ensuring comparable protection for workers across the EU
- That approach could include single workers at a single establishment, possibly some distance from the others affected – hardly the ordinary meaning of "collective redundancy"
- The ECJ therefore finds that the interpretation of the words "at least 20" requires account to be taken of the dismissals effected in each establishment considered separately.
- The ECJ observed that since the Woolworths and Ethel Austin employees were working at stores across the UK, the employment tribunals took the view that the stores were each separate establishments. It is for the Court of Appeal to establish whether the stores in these cases are indeed separate establishments.
What happens now?
The cases will return to the UK's Court of Appeal, which has to determine whether the stores are separate establishments or not. Although the ECJ has not said that each store should be a single establishment, its judgment suggests that this would be permissible. That decision will depend on pre-existing case law and the particular facts of each case.
The case is good news for employers, meaning that those looking to make 20 or more dismissals, or to change terms and conditions for 20 or more employees, within 90 days may no longer need to take the cautious approach of collective consultation across the business as a whole.
The Northern Irish case of Lyttle and ors v Bluebird UK Bidco 2 Limited was heard at the ECJ with USDAW and Wilson. The Lyttle case arose from the closure of Bonmarché stores across the UK in 2012. the ECJ held that a single retail outlet could form an establishment for the purposes of the Collective Reundancies Directive and "it is the entity to which the workers made redundant are assigned to carry out their duties that constitutes the 'establishment'".
When the Court of Appeal applies the ECJ guidance to the detailed facts we will have more clarity for UK employers. It looks likely that where sites have some management structure or clear identity stores and similar workplaces will be viewed as separate establishments. Where there is an "agile business", such as one run across sites, or with mobile workers, that may not the case.