Out-Law News 3 min. read
30 Apr 2015, 3:11 pm
The judgment by the Court of Justice of the European Union (CJEU) reverses a unexpected decision in 2013 by the UK's Employment Appeal Tribunal (EAT) in cases involving former employees of insolvent retailers Woolworths and Ethel Austin.The EAT ruled that employers had a legal duty to collectively consult employees whenever they planned to make 20 or more redundancies within 90 days anywhere across their business, regardless of how many redundancies would take place at any single location.
Employment law expert Christopher Mordue of Pinsent Masons, the law firm behind Out-Law.com, said that businesses would be "hugely relieved" by the decision.
"This is the end of an arduous legal battle which has caused confusion for UK businesses and could have led to compliance failures and millions of pounds of liabilities for UK employers," he said. "It is the best possible outcome for UK business – ending uncertainty and reversing a ruling which tore up the long established approach to collective consultation in the UK."
"The CJEU has now made absolutely clear that UK law legitimately limits the obligation to consult with unions or employee representatives only to cases where 20 or more redundancies are proposed at the same establishment. Today's decision will be especially welcomed by multi-site companies such as retailers, which would have been particularly at risk from significant additional costs and burdensome red tape if the duty to consult was confirmed for small-scale restructuring across several sites," he said.
The Court of Appeal in England and Wales had referred the question to the CJEU as part of an appeal brought by liquidators for Woolworths and Ethel Austin, with the UK government intervening, against the EAT's decision.
Collective redundancies are those where an employer proposes making 20 or more employees redundant within a 90-day period at one establishment.. The UK's Trade Union and Labour Relations (Consolidation) Act, which gives effect to the EU's Collective Redundancy Directive, requires that employers consult on proposals for collective redundancies with unions or representatives of the affected employees for at least 30 days where 20 or more redundancies are proposed "at one establishment", or for at least 45 days where more than 100 redundancies are proposed at an establishmnt. Employers who breach the consultation requirements may have to pay significant protective awards worth 90 days' gross pay to each affected employee.
The argument in the Woolworths and Ethel Austin cases was that the requirement in the UK legislation for the collective redundancies to be "at one establishment" breached the EU Directive. In 2013, trade union USDAW won a case on behalf of over 3,000 former Woolworths employees and over 1,200 former Ethel Austin employees who worked at smaller stores, and who were not consulted before being made redundant or paid the same compensation as their colleagues at larger stores. The EAT ruled that the words "at one establishment" had to be ignored and that whether collective consultation was required depended on how many redundancies would take place anywhere in the business in any 90 days.
In its judgment, the CJEU found that the meaning of the term 'establishment' was a matter of EU law that could not be interpreted differently by the various member states. Previous EU case law defined the term as "designating, depending on the circumstances, the unit to which the workers made redundant are assigned to carry out their duties" regardless of whether that unit was "endowed with a management that can independently effect collective redundancies", and the same definition applied in this case, it said.
"Interpreting that provision so as to require account to be taken of the total number of redundancies across all the establishments of an undertaking would, admittedly, significantly increase the number of workers eligible for protection under [the directive], which would correspond to one of the objectives of that directive," the court said in its judgment.
"However, it should be recalled that the objective of that directive is not only to afford greater protection to workers in the event of collective redundancies, but also to ensure comparable protection for workers' rights in the different member states and to harmonise the costs which such protective rules entail for EU undertakings … Interpreting the term 'establishment' in the manner envisaged … would … be contrary to the objective of ensuring comparable protection for workers' rights in all member states," it said.
The CJEU also said that the interpretation proposed by USDAW would extend the law to cover "a single worker of an establishment" in some cases. This would "be contrary to the ordinary meaning of the term 'collective redundancy'", it said.
The Northern Ireland Industrial Tribunals has asked the CJEU to clarify the meaning of 'establishment' in relation to an alternative threshold set out in the EU directive, in a case involving the restructuring of women's clothing chain Bonmarché. The CJEU is due to deliver its judgment in that case on 13 May.