Woolworths: collective redundancy test to focus on “local employment unit”

The Advocate General in Strasbourg has published his opinion in three conjoined cases which, if followed by the Court of Justice of the European Union (CJEU), will impact the trigger point when an employer will be obliged to collectively consult with its employees in a redundancy situation. Overall the opinion is helpful for employers by suggesting a move back to the position when management were obliged to count up redundant employees with reference to a local employment unit, rather than across the whole organisation.

Background

Between 2008 and 2010, Woolworths and Ethel Austin were forced to close down a large number of retail outlets across the United Kingdom as a result of going into administration and then liquidation. Over 28,000 employees were dismissed. USDAW the union was successful at Tribunal in obtaining protective awards for the majority of employees in relation to both employers’ failure to properly inform and consult with employee representatives. However, the Tribunal held that around 4,400 employees were not entitled to protective awards on the basis that, under UK legislation, they worked at retail outlets with less than 20 employees (each being a separate “establishment”) and therefore did not have a right to be collectively consulted.

USDAW appealed to the Employment Appeal Tribunal, arguing that the UK legislation was incompatible with the European Collective Redundancies Directive. The effect of USDAW’s argument was that the precise wording of the Directive requires the term “establishment” in the UK legislation to be interpreted holistically, so that if the numbers of employees to be dismissed across the employer’s organisation are more than 20, the duty to collectively consult would be triggered. The Employment Appeal Tribunal agreed. Moreover, it held that the Secretary of State be responsible for the payment of protective awards to all relevant workers in light of the employers’ insolvency. Our report on the original EAT decision may be found here.

The Secretary of State was allowed to appeal the decision before the Court of Appeal. The Court of Appeal stayed the claim, deciding to refer certain questions to the CJEU. First, the Court of Appeal enquired whether the 20 employee threshold in the European Directive refers to the number of dismissals across all of the employer’s establishments, or the number of dismissals in each individual establishment. Second, the Court of Appeal enquired whether the term “establishment” should be construed to mean the whole of the relevant business, or the unit (such as the store) to which a worker is assigned their duties.

The Advocate General said that European case law has already confirmed that “establishment” should be interpreted as “the unit to which the workers made redundant are assigned to carry out their duties”. The CJEU’s focus has traditionally been on the “local employment unit”, and to change stance now just to bring units with less than 20 employees into scope would be at odds with the Directive’s purpose. The aim of the Directive was not to provide protection for all workers dismissed in the course of the same restructuring exercise. It is up to the national courts to determine how exactly the local employment unit is constituted in each situation, which will depend on a number of factors, assessed under traditional principles derived from European case law.

The Advocate General stated that the CJEU has been at pains to stress the socio-economic effects which collective redundancies may have in a given local context and social environment. He further stated that although the aggregate number of dismissals in a restructuring process might be felt keenly on a national scale, separate communities may be impacted differently depending on the state of the local job market. The Directive does not require (nor does it preclude) aggregating the number of dismissals in all the employer’s establishments for the purpose of verifying whether the threshold is met.

Comment

The Advocate General’s opinion is only advisory and does not bind the CJEU. If followed by the CJEU, the opinion may be described as more helpful than not for employers who are dealing with the realities of multi-site redundancies and require clarity in this area. The Woolworths case first surfaced in 2011, and it may take until the end of the year to hear the view from the Court of Appeal.