A recent decision of the Employment Appeal Tribunal in the UK has considered the meaning of the words “at one establishment” for the purposes of triggering collective consultation obligations.
Under the UK collective redundancy rules, the obligation to inform and consult only arises when an employer is proposing to dismiss as redundant “20 or more employees at one establishment within a period of 90 days or less”. The case involved two retail companies which became insolvent, and the employment tribunal held that each of their stores was to be considered as a separate “establishment”. As a result employees who worked in stores where there were fewer than 20 employees were not entitled to receive a protective award for failure to inform and consult. This contrasted with their colleagues who worked at larger stores who did receive an award.
The EAT has now held that when interpreting the UK legislation in light of the underlying EU Directive, the words “at one establishment” should be ignored. Therefore any employer who is proposing 20 or more redundancies across an entire organisation is under a duty to inform and consult. The judge in this case took the view that the law on the interpretation of EU-based rights had reached a stage at which he could make this decision as to the interpretation of the EU Directive in the UK legislation. The EAT considered that the Directive gives Member States a choice on transposing the legislation and held that on the basis of the option chosen by the UK there is no need to construe the term “establishment” in any particular way because the duty applies “whatever” establishment the employees work in. The UK legislation therefore had to be interpreted in light of the Directive and the words “at one establishment” should be deleted from the legislation.
We wait to see if the decision is to be appealed, but given the fact that neither of the companies involved nor the Secretary of State was represented at the EAT, this seems unlikely. However, the implications of this judgment could be far reaching. For large, multi-site employers there will be obvious administrative challenges in ensuring that information on proposed redundancies is collated centrally and some large employers with a high turnover of staff could find themselves in a state of near constant consultation. This will have cost implications for employers both in bearing the administrative burden of compliance, but also the increased risk of protective awards for failure to comply. Employers will have to consider whether they should put in place a body of elected representatives to avoid the need for repeated elections. The decision may also have an impact on the form HR1 which an employer is obliged to submit to the UK Department for Business, Innovation and Skills (BIS) in relation to collective redundancies. A cautious employer will ensure that it submits forms whenever at least 20 redundancies are proposed, even if across a number of different sites. This is in spite of the fact that the purpose of notifying BIS is to alert them to an increased number of unemployed in a particular area. However, failure on the part of the less cautious employer to notify BIS in all such cases may lead to a conviction and fine.
In a further development, a separate Northern Ireland case has been referred to the European Court of Justice to consider the definition of “establishment”. This is unlikely to be the end of the “establishment” issue.