06 May 2015

Employment

Important ECJ opinion seems set to reduce scope of UK’s collective redundancies regime

The European Court of Justice has confirmed that ‘establishment’, for the purpose of the collective redundancy consultation provisions in the EU Collective Redundancies Directive (No.98/59), means the entity to which the worker is assigned in USDAW and another v WW Realisation 1 Ltd (in liquidation) and others C-80/14 (widely known as Woolworths).

The Dispute

The dispute began when dozens of Woolworths and Ethel Austin stores across the UK closed after the companies went into administration, resulting in the dismissals of thousands of employees by reason of redundancy. Under s188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (‘TULCRA’), an employer is required to collectively consult where it proposes 20 or more redundancy dismissals at one ‘establishment’ within a 90-day period, but the liquidator had conducted only a very cursory process. The trade union, which represented the employees, sought protective awards on their behalf in respect of the companies’ failures to inform and consult under TULCRA.

An employment tribunal agreed with the trade union that there had been a failure to collectively inform and consult, but only at stores with 20 or more employees. The tribunal considered that each individual store was an ‘establishment’ and so the obligation to collectively consult had not been triggered at stores with less than 20 employees. The Employment Appeal Tribunal allowed an appeal by the trade union, holding that TULCRA was too restrictive and did not comply with the Collective Redundancies Directive (98/59/EC).

A key question that arose in the proceedings was whether the consultation provisions were triggered in respect of stores and workplaces at which fewer than 20 employees worked, given that the consultation obligation arises only where it is proposed to dismiss 20 or more employees within 90 days at one ‘establishment’.

What does this mean for Employers?

Larger employers will breathe a sigh of relief as The Employment Appeal Tribunal had previously held that ‘establishment’ effectively means the employing legal entity, therefore requiring employers to aggregate all dismissals in the company, regardless of location or other employment unit, when assessing whether the threshold for collective consultation is reached.

The European Court of Justice decision is potentially more employer-friendly and confirms that the Collective Redundancies Directive does not require all ‘establishments’ to be aggregated for the purpose of the 20-employee threshold i.e. dismissals at workplaces at which fewer than 20 employees worked would not be added together with all other workplaces in the company.

Conclusion

This essentially shifts the focus back in the UK to the question of what the relevant ‘establishment’ is, based on the facts of the case in hand. It means that the collective consultation requirements are only triggered at those ‘establishments’ where it is proposed to dismiss 20 or more employees. Although in this case the ECJ has not conclusively determined that each individual store should be considered a separate ‘establishment’, its judgment clearly suggests that this is a permissible approach for the tribunals to take.

For further information please contact Daniel Wilde, Head of our Employment Department, on 01633 244233 or email

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