12 May 2015

Collective Redundancies and the Woolworths case: good news for employers

This article was written by Hilary O'Connor (partner), Nicola Kerr (partner) and Gina Unterhalter (associate).

Employers can breathe a much welcome sigh of relief as the European Court of Justice (ECJ) has announced its judgement in the controversial Woolworths case, which we reported on 11 February 2015.

Many Woolworths and Ethel Austin stores across the UK closed after the companies went into administration, resulting in the dismissals for redundancy of thousands of employees. The trade union which represented the employees sought protective awards on their behalf in respect of the companies’ failures to inform and consult. A key question that arose in the proceedings was whether the information and consultation provisions were triggered in respect of stores and workplaces at which fewer than 20 employees worked, given that the consultation obligation arises only where it is proposed to dismiss 20 or more employees within 90 days at one ‘establishment’. The tribunals found that individual branches were discrete ‘establishments’, meaning that there was no duty on the administrators to inform and consult on redundancies at any branch with fewer than 20 employees – hence no payment of a protective award triggered. However, on appeal, in 2013, the Employment Appeal Tribunal (EAT) controversially held that the number of proposed dismissals could not be restricted to individual establishments or shops; instead all employees of the same employer who faced redundancy in a 90 day period should be counted.

In its welcome decision, the ECJ has effectively overruled the EAT. EU Law allows Member States to restrict the count of proposed dismissals to individual establishments. The ECJ ruled that 'establishment' must be given the same meaning throughout the EU and, according to the ECJ, establishment means ‘the entity to which the workers are assigned to carry out their duties’. It confirms that ‘establishment’ in the collective redundancy legislation refers to an individual workplace/establishment, not the employer’s organisation/undertaking as a whole.

In the Woolworths case, it is now for the Court of Appeal to establish whether the employment tribunal’s decision (overruled  by the EAT) was based on a proper interpretation of UK law, in the light of the European legislation, and, we hope, provide further guidance on the meaning of establishment. Thus, although the ECJ has not conclusively determined on the facts of this case that each individual store should be considered a separate establishment, it does confirm that the EAT’s approach was wrong, returning us to the legal position prior to this case.

What does this mean for employers?

The good news is therefore that employers with more than one site generally do not need to aggregate all proposed redundancy dismissals across their various sites for the purposes of calculating whether the collective dismissals threshold is reached. This makes it significantly less likely that collective consultation obligations will apply where employers are conducting reorganisations over a number of sites. 

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