Collective redundancies and the meaning of ‘establishment’
Under the Trade Union Labour Relations (Consolidation) Act 1992 (TULRCA), UK law implemented the European Directive which sets out how to carry out collective redundancies.
Under this legislation, employers are obliged to collectively consult with their employees where they propose to dismiss as redundant 20 or more employees at “one establishment” within a period of 90 days or less. Collective consultation is more onerous than the normal redundancy requirements and employees can make claims in the Employment Tribunal if the information and consultation requirement are not adhered to. The issue at the centre of this case was what “establishment” means.
The highly debated case of Woolworths, Ethel Austin and others involved national high street retailers that went into administration, which meant large scale redundancies.
The employees were given financial awards by the Employment Tribunal for a failure by the employers to inform and consult under TULRCA. However, the awards were only made in respect of those employees who worked at stores with 20 or more employees. The argument centred around whether each Woolworths store, for example, was a separate establishment for the purposes of the legislation? Or should Woolworths have grouped all the employees together thereby meaning that employees in smaller stores of under 20 fell under the requirement for collective consultation?
Initially, the Tribunal found that each store was a separate establishment and therefore the duty to inform and consult did not arise where there were fewer than 20 employees in each store. This case was appealed to the Employment Appeal Tribunal (EAT) and then it was referred to the European Courts of Justice (ECJ).
The decision of the ECJ, handed down last month, was that establishment means a local employment unit. The ECJ said it was clear that the term “establishment” under the European directive means a unit or entity to which the workers made redundant are assigned to carry out their duties. To apply too wide a test to the meaning of establishment would mean that several different stores may be joined together so, in some circumstances, one worker in one store, for example, could be subject to collective consultation requirements even if there was no connection with the other stores where there were redundancies.
It was therefore left to the UK courts and tribunals to make a decision on what constitutes an establishment in each case. The Tribunal’s decision in this case was that each store was a separate establishment carrying out their activities from stores in different locations throughout the UK.
Many large employers will breathe a sigh of relief following this outcome as the ECJ decision found that TULRCA in its current form is compatible with the European Directive meaning that the tribunals are allowed to make the decisions themselves as to whether each store is a separate establishment.
Due to the complexity of collective consultation, employers would be wise to seek legal advice before carrying such redundancies to ensure they comply with all the necessary legal requirements.
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