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Employment Law

Legal guidance - compliance - software

11 MAY 2015

Collective redundancy - 'establishment' means local employment unit

Collective redundancy - 'establishment' means local employment unit
Mark Stevens
Associate, Veale Wasbrough Vizards

In a decision that will be of comfort to employers, the European Court of Justice (ECJ) has confirmed that collective consultation in a redundancy situation will be required where it is proposed to dismiss 20 or more employees only at one individual 'establishment', meaning the local unit or entity to which the redundant workers are assigned.

The European Court of Justice (ECJ) confirmed that the meaning of 'establishment', for the purpose of the EU Collective Redundancies Directive (No.98/59) (EU Directive)'s requirement to consult in collective redundancies, is the individual entity that the worker is assigned to, rather than the business as a whole. As such, it was confirmed that there is no need for employers to aggregate the numbers of workers in different workplaces.

The case of USDAW and anor v VW Realisation 1 Ltd and ors has had a lengthy history. By way of background, Woolworths and Ethel Austin went into administration, leading to many store closures and many workers being made redundant. Under s188 of the Trade Union Labour Relations (Consolidation) Act 1992 (TULCRA), which is the UK's adoption of the EU Directive, employers have an obligation to collectively consult with their workers if they are making 20 or more workers redundant at one establishment. Liquidators for these stores argued that collective consolidation obligations were not triggered at those Woolworths and Ethel Austin stores where 19 or fewer employees were being made redundant.

USDAW and UNITE brought claims on the behalf of the workers involved. The Employment Tribunal (ET) found that, even though there had been a failure to collectively consult with the workers, this duty to consult did not apply where individual stores were making less than 20 employees redundant. As a result of that decision, 4,500 employees were not entitled to a compensatory protective award.

On appeal to the Employment Appeal Tribunal (EAT), the EAT decided that s188 of TULCRA had failed to properly implement the EU Directive by its inclusion of the wording 'at one establishment' in the legislation and in order for TULCRA to be compatible with the EU Directive, such wording must be deleted. This decision caused significant concern for employers with a number of branches or offices nationwide, as it meant that employers would need to aggregate the total number of redundancies across the entire business when assessing whether it was under an obligation to collectively consult.

The case was appealed to the Court of Appeal (CA), who referred the questions to the ECJ on the position.

As we have previously reported, the Advocate General's opinion suggested that the ECJ would not agree with EAT's decision. The ECJ has now determined that the EU Directive does not require all establishments to be aggregated together, rather there is only a duty on employers to collectively consult where the threshold of at least 20 employees is met in each individual establishment. The domestic law was therefore worded correctly in these circumstances.

The matter will now return to the CA which will decide whether, in light of the ECJ's decision, it would be appropriate to treat individual Woolworths and Ethel Austin retail stores as separate establishments in order to determine whether collective consultation should have taken place. A further update will be published when the Court of Appeal gives its ruling.

Best practice

This case is good news for employers and returns to the previous case law position on the meaning of 'establishment'. This is likely to make redundancy procedures much more straightforward. Caution will still however need to be exercised where employees work across different branches or offices, or could be required to do so under their contracts of employment. Employers will still need to consider whether an employee is assigned to a particular workplace when considering redundancy consultation.
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