The question of what is meant by “establishment” in a collective redundancy situation is a subject of on-going debate.
Definition of “Establishment”
A collective redundancy is one that involves making a specified number of employees in an establishment redundant within a 30 day consecutive period. However, the definition of “establishment” under the Protection of Employment Acts 1977 – 2007 is anything but clear. For example, when calculating the total number of employees in an establishment, is it necessary to count the total number of employees within an employer’s entire organisation, or just those within the individual branch or location where the redundancies are being implemented?
In February 2015, the Advocate General of the Court of Justice of the European Union (“CJEU”) shed some light on the matter when considering the definition of “establishment” in the context of an appeal of a UK decision involving the UK high street chain Woolworths.
The Woolworths Case
In 2008, Woolworths made thousands of its staff redundant after it became insolvent. The staff claimed that they were denied a consultation period because they worked in numerous small shops throughout the UK. In 2014, the UK Employment Appeals Tribunal (“EAT”) held that for the purposes of collective redundancy consultation obligations, an “establishment” is an employer’s whole organisation irrespective of how many different branches it operates. In doing so, the EAT significantly extended the scope of employers’ collective redundancy obligations. The decision was appealed to the CJEU.
CJEU Advocate General’s Opinion
In considering the appeal, the Advocate General has 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 whole organisation.
What Does this Mean for Employers?
It is worth remembering that the Advocate General’s opinion is just that, an opinion. The CJEU may not follow this opinion in making its final judgment. However, if the CJEU does follow the Advocate General’s opinion and the UK EAT decision is subsequently reversed, collective redundancy consultation obligations should only be triggered when the relevant threshold is reached in one branch or division and not across an entire organisation. That said, if an employer operates several stores in one shopping centre, it is not inconceivable that all those stores could be regarded as a single local employment unit and fall within the definition of establishment.
If you are an employer who plans to implement a number of redundancies in several branches across your organisation, our view is that until the Advocate General’s opinion is accepted, you should adopt a cautious interpretation of “establishment”. Employers should be aware that failure to comply with the consultation obligations under Irish legislation can attract fines of up to €250,000. However, if the opinion is followed by the CJEU, the Irish legislation should be interpreted to mean that a collective redundancy is only triggered where for example there are least 5 dismissals in a local employment unit normally employing more than 20 and less than 50 employees.