Tag Archive: Woolworths

ECJ decision in Woolworths collective redundancy case

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.

Background

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”:

  1. 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
  1. 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.

ECJ decision

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.

Implications

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.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/ecj-decision-in-woolworths-collective-redundancy-case/

Woolworths redundancy appeal referred to ECJ

Alan Chalmers, a Partner in our Sheffield office comments: the Court of Appeal decided yesterday to make a reference to the European Court of Justice (ECJ) in the controversial Woolworths/Ethel Austin collective redundancy litigation.

In USDAW v Ethel Austin (in administration) the Ethel Austin and Woolworths chains of shops had gone into administration resulting in their employees being made redundant. The employees who were members of a trade union claimed protective awards for failure to consult collectively under s.188 TULRCA, which provides that an employer is required to consult with appropriate representatives when proposing to dismiss as redundant 20 or more employees at one establishment within a 90 day period. At the employment tribunal, only those employees who were employed at premises where 20 people or more were employed succeeded in claiming protective awards. Those who worked at stores of fewer than 20 people failed in their claims. The union appealed to the EAT. The issue before the EAT was whether s.188 was to be interpreted so as to omit the words “at one establishment” in order to give effect to the core objective of the EU Directive on collective redundancies,  allowing protective awards to be made to all employees whose employer dismissed 20 employees as redundant within 90 days. As reported in our Be Alert dated 2 July 2013, the EAT held that those words should be deleted. The consequence of this was that the Secretary of State (and ultimately the taxpayer) was liable for the protective awards.

Not long before the EAT handed down judgment in Ethel Austin, a tribunal in Northern Ireland referred a similar case, Lyttle v Bluebird UK Bidco Ltd, to the ECJ. That case concerned redundancies arising out of the administration of the Bon Marche chain.

In the Court of Appeal, the Secretary of State sought to argue that the appeal in Ethel Austin should be stayed pending resolution of the Lyttle case.

However, the Court of Appeal concluded that the appropriate course of action was to refer the case to the ECJ rather than stay the appeal. The Court took into account the fact that the employees in Lyttle did not have legal representation and considered that the ECJ would benefit from the employees having legal representation. In addition, the ECJ’s judgment in Lyttle might not dispose of all the issues as the ECJ would also need to consider whether, if UK law is incompatible with the Directive, the employees should be able to rely on the Directive against the Secretary of State in any event.

In the long term, it is almost certainly beneficial to employers to have a definitive resolution of this important issue. However, although it is possible that the ECJ will join the reference with Lyttle and expedite it, given the importance of the questions raised, it is unlikely there will be a decision any time soon; the usual timetable from reference to decision is around 18 months.  In the meantime, the practical difficulties arising from the EAT decision continue. This case has important implications for large employers with multiple locations, most obviously those in the retail, logistics and hospitality sectors. Whereas previously those employers did not have to collectively consult until there were at least 20 redundancies at any one establishment, now they must do so if the overall number of redundancies amounts to 20, wherever they occur. This can cause significant problems both in terms of recognising that the obligation has been triggered and in arranging the consultation meetings if participants are at different locations. Collective consultation will be longer and more expensive for employers in this situation.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/woolworths-redundancy-appeal-referred-to-ecj/