In our March update, we looked at the Opinion of the Advocate General (“AG”) of the Court of Justice of the European Union (“CJEU”) on the meaning of “establishment” for collective redundancy purposes in the context of an appeal of a UK decision involving the UK high street chain, Woolworths. The CJEU has recently confirmed the AG’s approach in Woolworths, in a decision which has been welcomed by employers. Below, we consider the implications of this decision for Irish employers.
We also provide an update on the industrial relations reforms discussed in our May update.
Collective Redundancies: CJEU Clarifies the Meaning of “Establishment"
In the Woolworths case, thousands of redundancies were made across various Woolworths’ stores in the UK. However, as most of the stores had fewer than 20 employees, Woolworths did not engage in any collective consultation process with the employees. This is because under UK law, there must be at least 20 redundancies within a single “establishment” to trigger the UK collective redundancy legislation. The employees’ trade union argued that the entire Woolworths organisation should be considered an “establishment” for the purposes of the legislation. In this case, the total number of dismissals in the establishment would far exceed 20 and would trigger the requirement for collective consultation. This interpretation was rejected by AG Bot, who recommended that for the purposes of determining when collective redundancy consultation obligations are triggered under EU law, “establishment” means the "local employment unit" in which the potentially redundant employees are assigned to carry out their duties and not the organisation as a whole.
The CJEU confirmed AG Bot’s approach and referred to its decision in Athinaïki Chartopoiïa (C-270/05), in which it held that an entity need not have any legal, economic, financial, administrative or technological autonomy, in order to be regarded as an “establishment” for the purposes of the Collective Redundancies Directive. The CJEU concluded that “according to the case-law of the Court, where an ‘undertaking’ comprises several entities … it is the entity to which the workers made redundant are assigned to carry out their duties that constitutes the ‘establishment’ for the purposes of [the Directive]."
What does this mean for Irish employers?
Under Irish law, a collective redundancy will not arise unless during any period of 30 consecutive days, the numbers of employees being made redundant in any one establishment are:
- 5 employees, where 21-49 are employed;
- 10 employees where 50-99 are employed;
- 10% of the employees where 100-299 are employed; or
- 30 employees where 300 or more are employed.
An employer has information and consultation obligations where a redundancy is collective.
As in the UK, there was previously some uncertainty in Ireland as to what constitutes an “establishment” for the purposes of the above thresholds.
This clarification by the CJEU is welcome, as it makes clear that when deciding whether the collective redundancy legislation is triggered, the focus should be on the number of redundancies made within the local entity to which the employees are assigned, and not within the entire organisation. There may, however, be some residual debate about what constitutes “the entity to which the workers are assigned”, for example, where two stores or businesses are situated closely to one another, and/or where their workers may move between the two.
If there is any doubt about what constitutes an establishment, employers should take legal advice before implementing collective redundancies, as a failure to comply with the obligations under Irish collective redundancy legislation can attract fines of up to €250,000, and can expose the employer to claims by each affected employee, who could be awarded up to four weeks’ remuneration.
Update on New Collective Bargaining Legislation and Recommended Increase to the National Minimum Wage
In our May update, we looked at the industrial relations reforms which are set to be introduced later this year. In particular, we discussed the Industrial Relations (Amendment) Bill 2015 which provides for an enhanced collective bargaining framework in Irish workplaces. We also looked at the National Minimum Wage (Low Pay Commission) Bill 2015, which provides a statutory basis for the Low Pay Commission (“LPC”) launched in February this year. The primary function of the LPC is to carry out an annual review of the national minimum wage.
By way of update, both Bills have now passed all stages in the Houses of the Oireachtas, and have been sent to the President for signature.
The LPC has also recently released its first report, in which it recommended that the national minimum wage be increased by 50c to €9.15. This recommendation has been criticised both by trade unions, who believe the increase is too small, and by employers, who believe the increase will pressurise small businesses. Taoiseach Enda Kenny TD has confirmed that “[t]he recommendations of the Low Pay Commission will be addressed in the Budget in October, alongside changes to the taxation system and the welfare system, so that all elements of our plan to make work pay will reinforce each other.”