Adam Hartley, a Partner in our London office, comments: the European Court of Justice (ECJ) has today handed down judgment in the reference from the Court of Appeal in USDAW v Ethel Austin (commonly referred to as the Woolworths case) on the question of when the obligation to consult on collective redundancies is triggered. In a decision which will be welcome news for employers, the ECJ has held that the requirement for collective consultation is triggered when the employer proposes 20 or more redundancies within 90 days at one establishment, not across the entire undertaking. This returns the law to how it was before the decision of the EAT in Woolworths.
This will be particularly welcome news for large employers operating across many establishments. The EAT’s decision in Woolworths created significant problems as it meant that 20 separate redundancies at 20 separate establishments could trigger collective consultation requirements, even though the reasons for the redundancies were disparate and separate. Large employers would have had to constantly monitor their operations for any dismissal which might be categorised as a redundancy because of the risk that this could trigger collective consultation obligations. This potentially placed a huge administrative burden on employers and, as the ECJ recognises in today’s decision, did not fulfil the objectives of the Collective Redundancies Directive (the Directive). Today’s ECJ decision produces a much more sensible result.
When the Woolworths and Ethel Austin chains of stores went into insolvent administration, in both cases the administrators implemented an extensive redundancy exercise, no collective consultation was carried out and the employees brought claims for a protective award for failure to consult. The tribunal made a protective award only in respect of those employees who worked in stores employing 20 or more staff. However, on appeal the EAT held that UK law was not compliant with the Directive and that the obligation to consult on collective redundancies should arise whenever there are 20 or more redundancies anywhere in the employer’s business (for more on the EAT decision see our Be Alert). The Court of Appeal made a reference to the ECJ to determine the proper meaning of the Directive.
The relevant provision of the Directive, Article 1(1)(a), provides Member States with a choice of two possible definitions of “collective redundancy”:
- The dismissal, over a period of 30 days, of at least:
- 10 workers in an establishment with 21-99 workers.
- 10% of the workforce in an establishment with 100-299 workers.
- 30 workers in an establishment of 300 or more (Article 1(1)(a)(i)); or
- The dismissal, over a period of 90 days, of at least 20 workers, whatever the number of workers normally employed in the establishments in question (Article 1(1)(a)(ii)).
Unlike the majority of EU member states, the UK opted for the second definition, which is given effect in UK law by s.188 TULRCA, which provides that employers are obliged to inform and consult collectively where they propose to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. The effect of the EAT’s decision in Woolworths was to delete the words ‘at one establishment’ from s.188, resulting in significantly more onerous consultation requirements for employers.
The ECJ stated that the term ‘establishment’ is a term of EU law and cannot be defined by reference to the laws of the Member States; it must also be interpreted in a uniform manner across the EU legal order. In the leading case Rockfon the ECJ had already decided that ‘establishment’ must be interpreted as designating the unit to which the workers made redundant are assigned to carry out their duties. It is not essential that the unit in question has a management that can independently effect collective redundancies.
In it judgment in Athinaiki the ECJ further clarified that an establishment may consist of a distinct entity, having a certain degree of permanence and stability, which is assigned to perform one or more given tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks.
Where an undertaking comprises several entities meeting those criteria, it is the entity to which the workers made redundant are assigned to carry out their duties that constitutes the establishment.
The ECJ stated that ‘establishment’ could not have a different meaning in the two possible definitions of collective redundancy.
The court noted that interpreting the Directive to require account to be taken of the total number of redundancies across all of the establishments of an undertaking would significantly increase the number of workers eligible for protection, which would correspond to one of the objectives of the Directive. However, this was not the only objective of the Directive; it is also to ensure comparable protection for workers’ rights in the different Member States, and to harmonise the costs which such protective rules entail for EU undertakings. The interpretation of the Directive argued for by the union would be contrary to those objectives.
It followed that the Directive requires account to be taken of the dismissals effected in each establishment considered separately.
It is for the Court of Appeal to determine whether the employment tribunals were correct in taking the view that the stores to which the employees affected by the dismissals were assigned were separate establishments.
This is a welcome return to the old law which will be particularly good news for multi-site employers in sectors such as retail, hospitality, transport and logistics. In the majority of cases, separate premises will be treated as separate establishments for the purposes of determining whether 20 or more redundancies are proposed in a 90 day period. This will make collective consultation much easier to manage than would have been the case if the ECJ had upheld the EAT’s interpretation of the law.