ECJ decision on Collective Redundancy.

The ECJ has delivered its decision in a case based on the interpretation of collective redundancies and how to determine the term “establishment”. It has held that the UK legislation does correctly implement the EU directive on collective redundancies and therefore that the term “establishment” must be interpreted as referring to the entity to which the workers made redundant are assigned to carry out their duties and not to the employer’s business as a whole.

In the UK an employer proposing to make collective redundancies is required to inform and consult with appointed representatives of the affected employees. The obligation arises where 20 or more employees are to be made redundant at one establishment within a 90-day period. A complaint of failure to consult may be made to an employment tribunal and if upheld, the tribunal can make a Protective Award. Issues arose in this case as to what should be considered to be an “establishment”. Each store or workplace had been regarded as a separate ‘establishment’ and therefore when the Employment Tribunal found that the employer had failed in its statutory duty to consult with the representatives before making the redundancies, the award was limited to workplaces where 20 or more redundancies were made. The Employment Appeal Tribunal (EAT) however held that the words “at one establishment” should be disregarded for the purposes of any collective redundancy exercise. This significantly extended the scope of the collective redundancy consultation obligation. The case was appealed and the Court of Appeal made a reference to the ECJ seeking clarification of the meaning of “establishment”.

The ECJ has followed the Advocate General’s opinion delivered in February. This therefore means that when determining the number of redundancies at an “establishment”, an employer should consider the unit to which the employees are assigned to carry out their duties rather than to the business as a whole. This means that employers will not have to consult with employees across multiple branches where only a small number of staff are at risk of redundancy at each “establishment”.  Whilst the Unions argued that regarding each store as an “establishment could lead to unjust and arbitrary results”, the ECJ noted in its judgement that an alternative interpretation would be contrary to the directives’ objectives of ensuring comparable protection for workers’ rights and rendering the burden of costs comparable in the different Member States. The ECJ also indicated that to require consultation with a single worker of an establishment because they could be aggregated with workers at other establishments would be contrary to the ordinary meaning of the term “collective redundancy”.

The case will now be returned to the Court of Appeal to consider whether the stores in this case can be classified as separate establishments, and it seems likely that the Court of Appeal will now reverse the EAT decision.

Larger employers who have employees at a number of sites will welcome this judgement as, if the ECJ had followed the EAT decision, they could have found themselves (as they should have been doing since the EAT decision) in a state of almost constant collective consultation with the headache of co-ordinating redundancies over multiple sites spread over a wide geographical area. The judgement also restores the link between the triggers for collective consultation and individual establishments which recognises that collective redundancies potentially have a much greater impact where they are concentrated in particular workforces and local areas.