The European Court of Justice (ECJ) has today handed down its long-awaited judgment in the USDAW v Woolworths and Ethel Austin case.
Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) provides that the duty to inform and consult employees on a collective redundancy is only triggered once an employer is proposing to dismiss as redundant 20 or more employees "at one establishment" within a period of 90 days or less.
Contrary to the decision of the EAT in July 2013, the ECJ has held that the word "establishment" should be interpreted to mean each individual entity to which redundant employees are assigned to carry out their duties, as opposed to all of the employer's entities.
Background
Woolworths and Ethel Austin went into administration in November 2008, resulting in a high volume of redundancies. USDAW, the trade union representing the dismissed employees, complained to the Employment Tribunal that Woolworths and Ethel Austin had breached their consultation obligations under TULRCA, and that protective awards should be made to affected employees.
The Employment Tribunal held that there had been a breach of the collective consultation obligations, and made protective awards of 60 days' gross pay per affected employee. However, it found that each store was to be regarded as a separate "establishment" for the purposes of TULRCA, and therefore the consultation obligations had not been engaged in respect of stores with fewer than 20 employees. Consequentially, around 4,500 former employees were denied a protective award on this basis.
On appeal, the Employment Appeal Tribunal held that section 188 TULRCA was more restrictive than the European Collective Redundancies Directive (the Directive) and that it should be read without the words "at one establishment". As a result, collective consultation obligations were engaged if 20 or more employees were to be made redundant across all of the employer's entities – the number of dismissals at each individual entity was no longer relevant. It followed that Woolworths and Ethel Austin should have also consulted with employees at stores with less than 20 employees.
The ECJ's decision
On appeal by the Secretary of State, the Court of Appeal referred a number of questions to the ECJ, including whether the phrase in the Directive of "at least 20" refers to dismissals across all of the employer's entities or the number of dismissals at each individual entity. The Court of Appeal also asked for clarification of the meaning of "establishment".
The ECJ held that where an employer comprises several entities, the word "establishment" means the entity to which the employees made redundant are assigned to carry out their duties and not all of the employer's entities as a whole. It further found that the phrase "at least 20" does not require employers to aggregate the number of redundant employees across all of its entities. Each "establishment" should be considered separately.
It follows that Woolworths and Ethel Austin were correct to consider each of their stores as separate "establishments", and that the failure to collectively consult with employees at stores with less than 20 employees was lawful.
The case has been referred back to the Court of Appeal to decide whether the individual stores were in fact separate "establishments" in light of the ECJ's judgment. It is likely to restore the Employment Tribunal's original decision on this issue. However, employers should be aware that there might be circumstances where workplaces that appear to be separate establishments might actually amount to one establishment.
We will provide a further update when the Court of Appeal delivers its judgment. In the meantime, the EAT's decision is still good law, and we would recommend that employers take advice if they are planning restructuring or redundancy processes across different locations.
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