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Collective redundancy consultation

Meredith Hurst Thursday, April 30, 2015

The ECJ was asked to consider whether the collective consultation obligations applied to the closure of Woolworths and Ethel Austin stores across the UK.  The law in the UK provides that when a business is proposing to dismiss as redundant 20 or more staff at one 'establishment', collective consultation obligations apply.  The employer has an obligation to allow employees to elect employee representatives and consult about ways of avoiding dismissals, along with other obligations.  It is not uncommon for businesses to dispense with these obligations when in administration, and in any event, the obligations do not apply when there are less than 20 employees at an employer's establishment.

The key issue in this case was whether dismissals at all stores across the UK should be conjoined, for the purposes of determining whether the collective consultation obligations applied, or, whether the employer could argue that because each individual store employed less than 20 people, the requirement to consult did not apply.  If the obligation to consult did apply, then employees would be entitled to 'protective awards'.  The length of the protected period is at the tribunal's discretion but carries a maximum penalty of 90-days' pay.

Many Woolworths and Ethel Austin shops closed across the UK after the companies went into administration.  Thousands of employees lost their jobs as a result.  USDAW the union, represented the employees affected and pursued claims for protective awards, arguing that the business as a whole amounted to one 'establishment' for collective consultation purposes.

The tribunals who heard the cases for the workers at first instance, found that the individual stores were establishments in their own right, the result being that there was no duty on the administrators to collectively consult. 

When the case went to appeal, the Employment Appeal Tribunal (EAT) found that by referencing 'one establishment' in the legislation, the UK had failed to properly transpose the European Collective Redundancies Directive from which the UK law emanates.  On a further appeal, the Court of Appeal referred the question to the ECJ, asking whether the phrase 'at least 20' in the Directive referred to the number of dismissals in an employer's business as a whole, or each individual site (or in this case) each store.

The ECJ has decided that the Directive does not require aggregation for the purposes of the 20 employee threshold.  It referred to another established European case called Rockfon, in which an 'establishment' was considered to be the individual unit to which workers are assigned.  This is the case even where the unit in question does not itself have management capability to carry out collective redundancies.

This decision will come as a blow to the workers concerned and whilst the Court of Appeal will have the final decision to make in the UK, the ECJ's Judgment indicates that the tribunals at first instance did not make an unlawful decision.