05 February 2015

Collective redundancy consultation: some comfort for employers


Employers do not need to count redundancies across the whole workforce when deciding whether they have reached the 20 employee threshold that obliges them to carry out collective redundancy consultation, according to an opinion handed down today by the Advocate General in the European Court of Justice (ECJ).

Background

UK and EU law require employers to consult collectively when numbers of redundancies reach specified thresholds. In the UK the key threshold is 20 or more redundancies at one establishment within a 90 day period. Collective consultation is relatively onerous and employers will generally prefer to avoid it if they legitimately can. However mistakes in this area are expensive as if the employer makes the wrong call each affected employee is entitled to claim a protective award of up to three months’ pay.

A decision of the EAT in July 2013 in the ‘Woolworths case’ (USDAW and anor v WW Realisation 1 Ltd (in liquidation)) has caused real difficulties for employers in this area. In that case the unions representing redundant shop workers employed at stores all over the UK by two employers, Woolworths and Ethel Austin, persuaded the EAT that in deciding whether the 20 employee threshold had been crossed it was necessary to look at numbers across the whole workforce, not at individual stores, meaning that the duty to consult collectively was much more easily triggered.

Because of the European law dimension and the importance of the issue for employers the Woolworths case was referred to the ECJ by the Court of Appeal. A similar issue was referred directly to the ECJ by the Belfast employment tribunal in the case of Lyttle and ors v Bluebird UK Bidco 2 Ltd.

The opinion

As we anticipated in our look ahead to the key employment changes for 2015 (What’s coming up in 2015?) the Advocate General has today handed down his opinion as to what is meant by ‘establishment’ in this context. His view, which does not bind the ECJ but is usually followed, is that ‘establishment’ means ‘the unit to which the workers made redundant are assigned to carry out their duties’. Hence employers are not required to count the numbers of dismissals across all the employer’s establishments in order to work out whether the 20 employee threshold has been reached.

The Advocate General added that the national courts must decide what an ‘establishment’ means in individual cases. He gave the interesting example of an employer that operates several stores in one shopping centre, commenting that it might be the case that all those stores were in fact one establishment. He set out criteria for deciding the issue based on:

  1. the degree of permanence and stability in the unit to which the employee is assigned;
  2. whether the unit performs one or more given tasks; and
  3. whether it can in practice accomplish its assigned tasks as a stand alone entity.

He added that it is not necessary for the entity to have legal, economic, financial, administrative or technological autonomy in order to be regarded as an establishment.

Comment

The Advocate General’s opinion is not the end of the story, but is a good indicator of its likely outcome. Given his comments on the need to decide at national level what constitutes an establishment, and the criteria suggested for making that decision, it is likely that this much litigated concept will continue to be argued over in individual cases. Meanwhile employers can take comfort from the fact that it is likely that at the end of this particular dispute, they will be back more or less where they were before July 2013 and that it will not be necessary to look across the whole workforce in deciding whether the 20 employee threshold has been reached.

An update will follow once the ECJ has made its final decision.

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Category: Article