Collective redundancy – what is an “establishment’?

The Advocate General of the European Court of Justice (ECJ) has now issued his opinion on the meaning of “establishment” for the purpose of determining when collective redundancy applies in the linked cases of Usdaw & Wilson v Woolworths and others, Lyttle v Bluebird and Cañas v Nexea.

For previous related blog entries in relation to this see https://devonshiresemployment.com/2014/03/17/collective-redundancies-ecj-to-consider-removal-of-the-establishment-requirement and https://devonshiresemployment.com/2013/07/22/collective-redundancies-eat-rules-to-change-meaning-of-establishment.

Law

Article 1(1)(a) of the European Collective Redundancies Directive (the Directive) provides member states with a choice of 2 possible definitions of “collective redundancy”:

  •  The dismissal, over a period of 30 days, of at least:
    o 10 workers in establishments with 21-99 workers.
    o 10% of the workforce in establishments with 100-299 workers.
    o 30 workers in establishments 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)).

The Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), designed to implement the Directive into UK law, adopts the second of the above definitions. It defines a “collective redundancy” as the dismissal as redundant of 20 or more employees at one establishment within a period of 90 days or less.

The question of whether the phrase “at least 20” in Article 1(1)(a)(ii) of the Directive refers to the number of dismissals across all of the employer’s establishments in which dismissals are effected within a 90 day period, or whether it refers to the number of dismissals in each individual establishment was referred to the ECJ by the Court of Appeal following the case of Usdaw & Wilson v Woolworths and others.

Background

The case of Usdaw & Wilson v Woolworths and others involved Woolworths and Ethel Austen going into administration in 2008 and 2010 respectively, resulting in large-scale redundancies. At the Employment Tribunals, awards were made against both businesses for failing to inform and consult under section 188 of TULRCA. But it in both cases, awards were only made against stores that had 20 or more employees. The Tribunals held that each store was a separate “establishment” for TULRCA purposes – consequently the duty to inform and consult only applied to those stores with fewer than 20 employees. Usdaw appealed the decision to the Employment Appeals Tribunal (EAT).

The EAT upheld Usdaw’s appeal in both cases, taking the view that the words “one establishment” in section 188 of TULRCA were incompatible with the Directive and should therefore be disregarded for the purposes of a collective redundancy involving 20 or more employees. Following a further appeal by the Secretary of State, the Court of Appeal referred the following questions to the ECJ:

  • Does the phrase “at least 20” in Article 1(1)(a)(ii) of the Directive refer to the number of dismissals across all of the employer’s establishments in which dismissals are effected within a 90 day period, or does it refer to the number of dismissals in each individual establishment?
  • If it refers to the number of dismissals in each individual establishment, what is the meaning of “establishment”? In particular, should “establishment” be construed to mean the whole of the relevant retail business, or the part of the business contemplating making redundancies, or the unit to which a worker is assigned their duties, such as each individual store?

The Advocate General’s Opinion

The Advocate General considered the Woolworths case along with the Northern Irish case of Bluebird and the Spanish case of Cañas as they were all factually similar and raised the issue of the meaning of “establishment” in the Directive.

The Advocate General took the view that “establishment” means the local employment unit to which the workers are assigned to carry out their duties and should be given a consistent meaning across the Directive. The Directive does not require, nor does it preclude, that the number of dismissals in all of the employer’s establishments be aggregated in order to determine whether the threshold for collective redundancy consultation is met.

The Advocate General also found that it is open to each member state to provide a greater level of protection, if it chooses to do so, as long as this would be to the benefit of all workers. He added that the issue of what is a local employment unit is a question of fact which will need to be determined by the referring courts in each case.

Comment

The Advocate General’s view is that “establishment” should have the same meaning in Article 1(1)(a)(ii) and Article 1(1)(a)(i) of the Directive. In other words, an establishment is the unit to which the redundant workers are assigned. However, the Advocate General also makes it clear that it will be for national courts to determine the extent of each employment unit.

It remains to be seen whether the ECJ will follow the Advocate General’s opinion, as it is not obliged to do so. The ECJ is expected to deliver its decision later this year. In the meantime, we would advise employers to continue to take a cautious approach and aggregate the numbers of redundant employees across different locations when determining whether the collective redundancy obligations are triggered.

For more information, please contact a member of the Employment Team.

Advertisements
This entry was posted in Devonshires. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s