Case update (3): Collective consultation – indirect redundancy

Summary: Does “redundancy” for the purpose of EU collective consultation laws include resignations in response to the employer making significant detrimental changes to the employee’s employment contract?

Yes, this is ‘indirect redundancy’ says the CJEU in Pujante Rivera v Gestora Clubs Dir SL and another available here.

Facts: Between 16 and 26 September 2013, Gestora Clubs Dir SL (Gestora) dismissed 10 employees, including Mr Pujante Rivera, for economic and production reasons. During the 90-day period preceding the last of these dismissals, a further 22 contracts were terminated for various reasons. These terminations included a resignation by an employee in response to Gestora’s unilateral reduction of her salary by 25%.

Mr Pujante Rivera brought proceedings against Gestora challenging the validity of his dismissal on the basis that Gestora had failed to carry out a collective redundancy consultation process. He argued that, if account was taken of the terminations which occurred in the 90-day period before and after his own redundancy, the necessary threshold for collective consultation was satisfied.

The Spanish national court referred the question to the CJEU, amongst others, as to whether an employee’s resignation in response to an employer’s significant and detrimental unilateral variation of contract amounted to a redundancy for these purposes.

The CJEU ruled that the definition of redundancy in the Collective Redundancies Directive should not be interpreted narrowly and could include a resignation in such circumstances. It explained that “The fact that an employer – unilaterally and to the detriment of the employee – makes significant changes to essential elements of his employment contract for reasons not related to the individual employee concerned falls within the definition of ‘redundancy’ for the purpose of ….the Directive.”

Implications: As a reminder, the requirement for collective consultation is triggered when an employer proposes 20 or more redundancies or changes to terms and conditions within 90 days at one “establishment”. (For the definition of ‘establishment’ please see our May 2015 Newsletter Case-update (1): Collective consultation – big decision time).

What is new is that employers who are planning on imposing significant detrimental changes to terms and conditions should be aware that resulting constructive dismissals are likely to count towards numbers of redundancies in the 90 day period, and may unexpectedly trigger the obligation to consult collectively and to submit HR1 forms. Employers who are cutting pay to try to avoid redundancies might consider collectively consulting from the beginning of the process, to avoid unexpectedly falling foul of collective obligations.