UK: What Is An 'Establishment' For Collective Redundancy Consultation Purposes?

The Advocate General has given a preliminary opinion in the case of USDAW & Wilson v Woolworths and others ("the Woolworths case") on the question of whether there is a requirement to aggregate the number of employees across different locations to meet the thresholds for collective consultation obligations (in England and Wales, of 20 employees in a 90-day period).

Advocate General Wahl found that the meaning of "establishment", for the purposes of calculating whether the threshold has been met, did not necessarily mean all affected locations owned by the employer. Instead, the Advocate General stated that an "establishment" is effectively a "local employment unit" which it is for a national court to determine.

Background

In England and Wales, collective consultation obligations arise where 20 or more dismissals are proposed at one "establishment" within a 90-day period (as set out in the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA")).

The well-known Woolworths case relates to claims by former employees of the now insolvent retail group, that they should have been entitled to protective awards for failure to comply with collective consultation obligations. The approach taken by Woolworths was to consider whether there were 20 or more employees at one location and, if not, to take the view that collective consultation obligations did not apply.

The Employment Tribunal agreed that each store should be considered as a separate "establishment". On appeal, the Employment Appeal Tribunal held that the provisions of TULRCA were incompatible with the European Directive from which they were derived. The reason for this is that the Directive does not refer to the need for employees to be based "at one establishment".

The EAT therefore stated that the words "at one establishment" should be disregarded, meaning that the threshold of 20 employees may be met by calculating the number of dismissals for one employer across all locations. This could have a huge impact, particularly on larger businesses with a number of sites across the country, and could make collective consultation processes far more frequent.

The matter was appealed to the European Court of Justice ("ECJ") to decide the point.

Questions asked to the ECJ

  • When calculating whether 20 or more employees are at risk of dismissal, does this relate to the number of employees in one establishment or across locations?
  • What is the meaning of an "establishment"?
  • Should the Directive be seen as having "direct effect", i.e., be able to be relied on even if it was not properly put in place by the member state?
  • Would the member state be liable in circumstances where the employer was insolvent and could not satisfy the claim?

Advocate General's position

Prior to the matter being considered by the ECJ, Advocate General Wahl set out his view on the case. Two other cases were linked with the Woolworths case and they were considered together.

On the question of whether proposed dismissals across location must be aggregated, he considered that the Directive did not confirm the position either way, and confirmed that it is for the member states to make a choice.

He stated that the meaning of "establishment" was a "local employment unit". In the decision, the Advocate General referred to the importance of having protection in place where a large number of dismissals are to be made in the same local area (given the impact this would have on the local community and the limited jobs available in one location). This suggests that there should be some geographical limitation when assessing an establishment. The Advocate General also stated that a local employment unit could be determined by member states, and would be on the facts of each case.

The Advocate General declined to give an opinion on the questions relating to direct effect and liability of member states.

What does this mean for employers?

While it is not certain that the ECJ will follow the Advocate General's opinion, this is usually the case.

A number of questions remain unanswered, but the good news for employers is that the decision suggests that when calculating the number of proposed dismissals, an "establishment" should relate to employees within the same general locality, even if this is not limited to one office or location.

When thinking about whether the collective consultation obligations should apply, employers should look at whether employees are located in such a way that they could be considered to be a "local employment unit". Existing case law suggests that there should be a distinct entity in place with a degree of permanence and stability which has a structure in place to enable it to fulfill certain tasks (for example, a number of sites controlled by a regional management structure might be regarded as a "local employment unit"). It will be a question of fact whether employees across locations should be aggregated when assessing whether the 20-employee threshold is met.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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