Employers Can Count Redundancies on a Per Establishment Basis

The Advocate General has indicated that the UK is allowed to limit the obligation to consult collectively about redundancies to cases where the proposed redundancies (20 or more) are at the same establishment. However, what constitutes an establishment in any given case is still up for grabs.

In USDAW another v Ether Austin, USDAW brought claims for a protective award after Ethel Austin and Woolworths each went into administration, resulting in the closure of all stores. USDAW alleged that there had been a failure to comply with obligations to consult with employee representatives about the resulting redundancies (“collective consultation”). The employment tribunals upheld USDAW’s claims and protective awards were made. However, employees working in stores with fewer than 20 employees were excluded on the basis that the UK legislation only requires collective consultation where the proposed redundancies are at the same establishment. The tribunals found that each store was a separate establishment and so the employees working at smaller stores were not entitled to an award. 

USDAW appealed both decisions to the Employment Appeal Tribunal (“EAT”) and the cases were heard together. The EAT ruled that the UK legislation does not comply with the Collective Redundancies Directive, although it could be construed in order to give effect to the Directive by deleting the words “at one establishment” from the legislation. As a result employees who worked at stores which employed fewer than 20 employees were also entitled to protective awards. 

As both Woolworths and Ethel Austin were in administration, liability for protective awards passed to the Secretary of State who would have to make payments from the National Insurance Fund. The EAT granted the Secretary of State leave to appeal to the Court of Appeal which referred the case to the ECJ. 

The Advocate General has given his opinion that UK law does comply with the European Collective Redundancies Directive. Employers do not therefore have to aggregate redundancies across all establishments when determining whether the threshold of 20 redundancies has been met. 

The Advocate General’s opinion will be welcomed by employers. If the ECJ agrees when it comes to give its judgment, it means that employers will only have to collectively consult about proposed redundancies if the redundancies are at the same establishment. 

However, the question of what amounts to an establishment in any given case remains wide open. The Advocate General indicated that previous European case law interpreting the concept of an establishment applies. This talks about “the unit to which the workers made redundant are assigned to carry out their duties” and makes it clear that it is not necessary for that unit to have its own management capable of independently making redundancies. 

The Advocate General suggested that if an employer operates a number of stores in one shopping centre it is not inconceivable that all those stores should be regarded as one establishment. The Employment Appeal Tribunal in the Woolworths case went further than this and said that it would have interpreted “establishment” broadly to mean the whole of Woolworths’ retail business, as opposed to each of the stores, had it been necessary to do so. On that basis, employees employed at Woolworths stores which employed fewer than 20 employees would be entitled to protective awards. No doubt this is something which the Court of Appeal will consider when it comes to give its judgment.