In 2013, we saw the Employment Appeal Tribunal effectively re-write the statute book and change the way employers needed to approach collective redundancy consultation, by removing the need for redundancies to be at one establishment”. The European Court of Justice (ECJ) has now given its Judgment and it looks like the law may be returning to how it was before the EAT’s decision in the case of USDAW and anor v VW Realisation 1 Ltd and ors (“The Woolworths case”). If you want to see the blog which I originally wrote regarding this case please click here.
Employers will breathe a huge sigh of relief as the ECJ has ruled that “establishment”, for the purposes of collective consultation in the EU Collective Redundancies Directive (“the Directive”), means the entity in which the worker is assigned and not the employer as a whole. Our domestic law previously said that if an employer comprises several establishments (say branches, offices, stores) where it is proposed to dismiss 20 or more employees for redundancy within a 90 day period, collective consultation is only required where those dismissals take place at one establishment.
You may remember that Woolworths and Ethel Austin shops across the country closed after they went into administration; thousands of employees were dismissed for redundancy as a result. USDAW, the trade union which represented the employees, sought compensation in respect of the companies’ failure to consult staff in those stores with fewer than 20 employees. They argued that the Directive had been incorrectly transposed into UK law, with the result that employers are required to collectively consult when 20 or more employees in the entire company were being made redundant.
Somewhat surprisingly, after years of the law in this area being settled, the EAT took the view that the phrase “at one establishment” should be deleted from the statute altogether to make it compatible with EU law. This decision by the EAT created a situation where employers, particularly those who employed large numbers of employees across the country, had to be on high alert whenever any redundancies were being made in case the headcount reduction across the whole organisation surpassed the all-important 20 mark within a 90 day period.
On appeal, the Court of Appeal referred the case to the ECJ as to whether the Directive in saying “at least 20” meant dismissals across all of the employer’s establishments in which dismissals were effected within the 90 day period, or the number of dismissals within each individual establishment.
The ECJ have now confirmed that when establishing when an employer needs to engage in collective consultation, you do not need all establishments to be aggregated for the purpose of the 20 employee threshold. In the context of the Woolworths case, the ECJ did not conclusively rule whether each store should be considered an “establishment” and the case has been referred back to the Court of Appeal for the case’s final ruling on this question. However, given the ECJ Judgment, it would seem likely that the Court of Appeal will take the lead from the ECJ and conclude that each store is a separate establishment.
The direction of travel is further emphasised by another recent ECJ decision in Lyttle v Bluebird, which was referred by the Northern Ireland Industrial Tribunal. In this case the Court held that “establishment” means the entity to which the workers being made redundant were assigned to carry out their duties, which could be an individual retail store.
This approach taken by the ECJ is likely to spell the end of the “establishment” question which has troubled employers for the last couple of years, but employers should not change their approach until the Court of Appeal Judgment is delivered and assessed.
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