Case update (1): Collective consultation – big decision time

In our May 2015 Newsflash Collective consultation – an update we updated you that the CJEU followed the Advocate General’s Opinion in the Woolworths case (USDAW and another v WW Realisation 1 Ltd (in liquidation) and others). The CJEU’s decision is set out below.

Summary: The CJEU has confirmed that collective consultation is not triggered whenever planned redundancies, or changes to terms and conditions add up to 20 or more across the whole of the UK business. Instead the trigger is at least 20 employees from a particular “establishment” within a period of 90 days.

We consider this decision in more detail below and, in particular, the CJEU’s guidance on what is meant by an “establishment”.

Facts: When Woolworths (and another employer named Ethel Austin) became insolvent, there was collective consultation on redundancies. Each individual store was treated as “one establishment” for this purpose, as had been accepted practice in the UK for many years, and as a result there was only collective consultation at the bigger stores, i.e. those with 20 or more employees on the one site. The trade union, USDAW, brought claims against the Government for protective awards on behalf of the former staff at Woolworths’ smaller stores who had not benefitted from collective consultation because the redundant staff on sites had not numbered 20.

The Tribunal applied the law as it always had been and found that each store was a separate “establishment” and consequently, the duty to consult was not engaged in respect of stores with fewer than 20 employees being made redundant. Therefore those staff were not given a protective award for a failure to collectively consult.

USDAW appealed to the EAT.

In a surprise decision, the EAT held that the long-accepted understanding that the duty to collectively consult only kicks in when 20 or more employees are being made redundant in “one establishment” did not reflect the relevant EU Directive. The EAT decided that, in order for the relevant UK legislation to reflect EU law, the words “at one establishment” should be deleted from the legislation and ignored by Tribunals. This decision was particularly surprising given that previous case law had suggested it was for Parliament, not the EAT, to correct any error in the UK legislation.

The Government appealed to the Court of Appeal. A spokesman for the Government commented that “in reaching its decision we think the EAT has got the law wrong and it is our view that the decision will have wider implications.”

The Court of Appeal referred the case to the CJEU.

The CJEU held that the requirement for collective consultation is triggered when the employer proposes 20 or more redundancies or changes to terms and conditions within 90 days at one “establishment“, not across the entire undertaking.

The CJEU stated that the term “establishment” must be interpreted as meaning the unit to which the workers made redundant (or subject to changes to terms and conditions) are assigned to carry out their duties. This will normally be just a part of the overall organisation.

Where redundancies are proposed across different sites, the issue remains – is each site a separate establishment, or should sites instead be aggregated to create an establishment? Deciding what the establishment is will depend on the facts. In the Woolworths case itself, each store was a separate establishment. This meant that the obligation to collectively consult wasn’t triggered in smaller stores with fewer than 20 employees.

According to the CJEU it is not essential that the unit in question has a management that can independently affect collective redundancies. Also, an establishment may consist of a distinct entity, having a certain degree of permanence and stability, which is assigned to perform one or more given tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks.

Implications: This is good news for employers! Particularly for large employers operating across many establishments. Ultimately this is a return to the ‘old’ pre-Woolworths position and the Court of Appeal will apply this ‘old’ law accordingly and no doubt overturn the EAT’s unhelpful decision.

The CJEU’s guidance on the meaning of establishment is useful, particularly as the test of what constitutes an “establishment” is not an easy one, and a careful analysis will need to be undertaken where redundancies are proposed across several sites. The analysis of whether one or more work site can be defined as an “establishment” is highly fact specific, so employers should always take care when implementing large-scale redundancies.

However, that said, the guidance does confirm the ‘old’ law and to that extent employers need not spend too much time on this!