Case update (2): Collective consultation – a brighter future?

We updated you in our February Newsflash Collective consultation – an update that Advocate General Wahl has given his opinion that collective consultation is not triggered whenever planned redundancies, or changes to terms and conditions add up to 20+ across the whole of the UK business.

We explore this decision in more detail below…

Summary: Is the duty to collectively consult on 20+ planned redundancies (or changes to terms & conditions) triggered when the 20+ roles are spread across more than one of an employer’s sites?

No, according to Advocate General Wahl in USDAW and another v WW Realisation 1 Ltd (in liquidation) and others available here.

Facts: When Woolworths (and another employer named Ethel Austin) became insolvent, there was collective consultation on redundancies at certain stores only. Each 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 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 had been accepted practice, 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 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.

The Government appealed to the Court of Appeal. The Government echoed the common feeling 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 ECJ (now the CJEU).

Before the ECJ makes a decision it falls to an Advocate General to give an opinion on the case. On this occasion it is Advocate General Wahl who has done so. The good news for employers is that Advocate General Wahl’s opinion is that collective consultation is not triggered whenever planned redundancies, or changes to terms and conditions add up to 20+ across the whole of the UK business.

The Advocate General’s opinion is that the EU law on this point (the Collective Redundancies Directive) means that collective consultation is only triggered whenever planned redundancies, or changes to terms and conditions, add up to 20+ at one site. i.e. the term ‘establishment’ as referred to in the Directive is not the whole UK business but just the local site at which the employee works.

Advocate General Wahl recognised that the term “establishment” had previously been determined by the ECJ in relation to Article 1(a)(i) of the Directive and advised that it would be “nonsensical to envisage a fluctuating interpretation” which would remove legal certainty. As such, it repeated the CJEU’s previous ruling on the meaning of “establishment” in another case, that an establishment is the local employment unit to which an employee is assigned to carry out their duties.

However, the Advocate General considered that it is for each national court to determine how the local employment unit should be defined as this will turn on the facts of each case. For example, if an employer operates several stores in one shopping centre, in the Advocate General’s view it would not be inconceivable that all of those stores should be regarded as forming a single local employment unit.

Implications: This is good news! If this opinion is followed by the ECJ, it means that collective consultation will be required less frequently with less administrative headaches. However, Advocate Generals’ opinions are not binding and we must still await the ECJ’s judgment due later this year. Although the ECJ often follows the Advocate General’s opinion, this is not always the case. If the ECJ does follow this opinion, it would be a welcome development for employers as it would allow the UK courts to revert back to the previous interpretation of the law in terms of what constitutes an ‘establishment’ for the purposes of collective consultation.

However, in the meantime, the current state of uncertainty remains and we recommend that employers remain cautious and aggregate redundancies across all sites for the time being. While this is likely to be administratively burdensome for employers, the potential liabilities from a failure to comply with the law as it currently stands may prove to be even more costly.