Collective Redundancy Consultation and the Meaning of ‘Establishment’

May 11, 2015

Collective Redundancy Consultation and the Meaning of ‘Establishment’

Under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992, employers have a duty to consult with appropriate representatives of employees concerning forthcoming redundancies if 20 or more employees are to be dismissed at one establishment within a 90-day period. Failure to do so can lead to a protective award requiring the employer to pay each affected employee 90 days’ pay.

In May 2013, in a decision involving the protective awards payable to employees made redundant by retail chains Woolworths and Ethel Austin, the Employment Appeal Tribunal (EAT) ruled that the words ‘at one establishment’ should be deleted from the Act, in order to give effect to EU Council Directive 98/59EC, which it is intended to implement, and protective awards were payable to former employees who had worked at stores with fewer than 20 members of staff (USDAW and Another v Unite the Union and Others).

The effect of that ruling would be that the duty to consult would be triggered when at least 20 employees were to be dismissed as redundant from a business as a whole, irrespective of the number of people employed in each individual workplace.

The employers appealed to the Court of Appeal, which in turn sought the opinion of the Court of Justice of the European Union (CJEU).

The CJEU has now handed down its judgment, which will be welcomed by employers.

In the CJEU’s view, where an undertaking comprises several entities, it is the entity to which the workers made redundant are assigned to carry out their duties that constitutes the ‘establishment’, not the business as a whole. The term ‘at least 20’ requires account to be taken of the redundancy dismissals in each establishment considered separately.

Whilst member states are entitled to increase the level of protection afforded to workers when there are to be collective redundancies, they are nonetheless bound by the ‘autonomous and uniform interpretation’ given to the term ‘establishment’ in EU law.

The case was referred back to the Court of Appeal to determine whether the stores could be classified as separate establishments.