The ECJ in the ‘Woolworths’ collective redundancy case has today ruled that when deciding whether the obligation to collectively consult on redundancies is triggered, the focus is on the proposed redundancies in the establishment in question, rather than across the organisation. This can significantly reduce an employer’s redundancy consultation liabilities where it makes large scale redundancies.

Prior EAT decision imposed onerous collective consultation obligations

The obligation to collectively consult arises when an employer proposes to make 20 or more redundancies within 90 days at one establishment. However, in 2013 the EAT in the ‘Woolworths’ (USDAW v. Ethel Austin Ltd (in administration)) case said that this didn’t reflect what was required by the underlying EU Directive. The EAT said that the words “at one establishment” should be disregarded, so that it was necessary to count redundancies made at all establishments within the organisation when deciding whether the collective consultation obligation was triggered. The effect of the EAT’s decision was that multi-site employers making redundancies across their organisation were far more likely to trigger the obligation to consult collectively. This had significant implications for employers, not least because an employer who fails to collectively consult properly can be liable for up to 90 days’ uncapped pay for every affected employee.

Given the importance of this issue, the case was appealed to the Court of Appeal, which in turn referred it to the ECJ for a ruling on what the law requires.

ECJ overturns EAT decision – the focus is on redundancies in a particular establishment

The ECJ says that the focus is on redundancies made in a particular establishment, not across the whole organisation. An establishment is the business unit to which the employees are assigned to carry out their duties. This will normally be just a part of the overall organisation.

The question of what is an ‘establishment’ is still fact specific

Where redundancies are proposed across different sites, the issue remains – is each site a separate establishment, or should sites instead be aggregated to create an establishment? Deciding what is the establishment will depend on the facts. The size of the establishment is important, because the smaller the establishment, the less likely it is that there will be sufficient employees to meet the 20 or more employee threshold that triggers collective consultation obligations. In the Woolworths case itself, each store was a separate establishment. This meant that the obligation to collectively consult wasn’t triggered in smaller stores with fewer than 20 employees.