ECJ limits the scope of collective consultation obligations
The European Court of Justice ("the ECJ") has confirmed that the trigger for collective redundancy consultation is the proposal to dismiss for redundancy 20 or more employees in one establishment, e.g. store as opposed to 20 or more employees across the whole of an employer's business – this is therefore a welcome decision for multi-site businesses.
This case concerned the collapse of the national high street retailers Woolworths and Ethel Austin, which resulted in large-scale redundancies and store closures. In the Employment Tribunal, it was decided that each Woolworths and Ethel Austin store was a separate establishment, and that in stores with fewer than 20 employees there was no duty to collectively consult those employees. However, on appeal, the EAT decided that employers should count redundancies across their wider business, as opposed to individual stores. This caused problems for employers with multiple offices and business sites and many businesses experienced a difficulty in monitoring this situation and ascertaining when the threshold had been reached.
The case was appealed to the Court of Appeal who decided to refer the matter to the ECJ. The ECJ has subsequently decided that previous UK law was right to use a threshold of 20 or more redundancies per establishment and does not need to look at total redundancies in the business. The case has now been referred back to the Court of Appeal who will decide, on the facts, whether each branch of Woolworths and Ethel Austin were separate establishments. An establishment is the place of work unit to which the employees are assigned and does not need to have its own management, financial or administrative autonomy, so it could well be an individual store, as the ET originally decided.
The ECJ's judgment is a welcome decision for businesses operating across multiple sites and business units as it reduces their obligations to undertake collective redundancy consultation in respect of only establishments propose to dismiss as redundant 20 or more employees redundant over a period of 90 days or less. We are waiting for the Court of Appeal's judgment on this point, but it seems that in most cases each individual store will be treated as an individual establishment. This decision does not mean that each separate geographical location will always be a separate establishment, that is a matter for the local courts to decide and will depend on the particular circumstances. For example, in the Advocate General's opinion, which was published prior to this judgment, "if an employer operates several stores in one shopping centre, it is not inconceivable that all of those stores should be regarded as forming a single local employment unit" and HR teams should consider this question carefully in relation to each redundancy exercise.
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