To the relief of employers, the Court of Justice of the European Union (CJEU) has rejected a controversial Employment Appeal Tribunal (EAT) decision which had overturned long-established collective redundancy consultation law and practice.
The CJEU has confirmed that the threshold which triggers collective redundancy consultation obligations should be at least 20 employees from a particular establishment within a period of 90 days, not 20 employees across the whole employer. The Court also provides further guidance on what is meant by an ‘establishment’.
The case now returns to the Court of Appeal which will overturn the EAT’s decision and, according to the CJEU, review whether the correct test for ‘establishment’ was applied to the facts of the case (see below).
Background to today’s judgment
The EU Collective Redundancies Directive provides two options for member states to frame how the consultation duty is triggered. The second option, adopted by the UK, gives rise to a duty to consult representatives when the number of contemplated redundancies is ‘over a period of 90 days, at least 20, whatever the number of workers normally employed in the establishments in question’. The exact meaning of these words, and whether they had been correctly implemented in UK law, became critical in the context of the facts below.
Woolworths and Ethel Austin went into administration and the employees lost their jobs. All the USDAW (the trade union) members who lost their jobs claimed protective awards on the basis of an absence of collective consultation prior to dismissal. Those working in shops where 20 or more were dismissed succeeded, whereas those working in shops where there were fewer than 20 failed. This is because, under UK law, there had not been dismissals of ‘20 or more employees at one establishment within a period of 90 days’ and therefore the duty to consult collectively had not been triggered. They appealed to the EAT.
The EAT decided that UK law was wrong and that the correct interpretation of the Directive requires consultation when 20 or more employees are to be dismissed by an employer, irrespective of where they work. On appeal, the Court of Appeal asked the CJEU whether the EAT’s approach was correct, or whether the trigger is in fact 20 or more redundancies in a particular establishment.
The CJEU has decided that the Directive does not require aggregating the number of dismissals in all the employer’s establishments for the purpose of triggering the duty to consult. It also confirms that the term ‘establishment’ is an EU term, meaning that its interpretation must comply with EU case law to ensure uniformity. It reiterates that an ‘establishment’ is the entity to which the workers made redundant are assigned to carry out their duties and, as was previously the case, this will depend on the circumstances.
This is good news for employers. The EAT’s decision had resulted in the extension of collective consultation beyond large scale redundancies to include fragmented, unrelated and ad hoc redundancies. As the CJEU observes, this goes against the ordinary meaning of ‘collective redundancy’, can result in the application of procedures that are not appropriate in very small redundancies and can result in higher costs for multi-site employers.