Out-Law News | 05 Feb 2015 | 3:56 pm | 4 min. read
Last year, the UK's Employment Appeal Tribunal (EAT) ruled that employers must collectively consult whenever they planned to make 20 or more redundancies within 90 days across their business, regardless of how many were in a single location. Liquidators for the Woolworths and Ethel Austin retail chains, with the UK government intervening, appealed the decision; and the 'establishment' question has now been referred to the Court of Justice of the European Union (CJEU) as part of that appeal.
Employment law expert Christopher Mordue of Pinsent Masons, the law firm behind Out-Law.com, said that the opinion published by advocate general Nils Wahl would be greeted with "great relief" by employers if ultimately upheld by the CJEU. The opinions of advocates general are not binding on the court, but are followed in the majority of cases.
"The EAT's approach in Woolworths greatly extended the burden of collective redundancy consultation by requiring all proposed redundancies in the employer's business to be taken into account when deciding whether the threshold for consultation was triggered," he said. "In practice, this meant that possibly all redundancies - even a single redundancy at a specific site - would be subject to collective consultation because of others happening at the same time elsewhere in the business, as well as the risk of substantive protective awards if the obligation was not complied with."
"From a practical perspective, a key fear of many employers post-Woolworths was of being caught out as redundancy proposals emerged over time across the business. They may have thought that consultation was not required in relation to a specific set of proposed redundancies only to find that other redundancies were then proposed within the same time frame at another site, triggering the duty to consult part-way through implementation of the first batch of redundancies and creating unexpected liabilities to protective awards. Those fears may be taken away – but we'll need to await the final decision from the CJEU," he said.
Collective redundancies are those where an employer proposes making 20 or more employees redundant within a 90-day period. 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 before they can make any redundancies, or for at least 45 days where more than 100 redundancies are proposed at one establishment..
The difficulty that arose in the Woolworths case was caused by the addition, in the UK's version of the rules, of the rule that there had to be 20 or more redundancies proposed "at one establishment" before the consultation requirement arose. 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 were not consulted before being made redundant. The EAT ruled that the words "are one establishment" had to be ignored.The Northern Ireland Industrial Tribunals has also asked the CJEU to clarify the meaning of "establishment" in a case involving women's clothing chain Bonmarche in relation to an alternative threshold set out in the EU directive.
Giving an opinion on both cases, as well as on a separate referral by the Spanish courts, Advocate General Wahl said that "the way in which the employer-entity is structured internally" was less relevant than the "local employment unit". For this reason, it would be "misguided" to interpret the law as "bracketing together" all relevant dismissals into one single restructuring exercise, he said.
"Conferring the maximum level of protection by downplaying the method of implementation [of the restructuring exercise] would obviously be to the advantage of those workers who, under the current understanding of the concept at issue, are not entitled to any protective award," he said. "However, such an approach would not be consonant with the minimum harmonisation aim envisaged by [the directive] which ... does not contemplate as a starting point full protection for all - even where the number of dismissals exceeds the thresholds - as the temporal [i.e. 90 day] requirement must also be met."
"What is more, it has not escaped my attention – nor that of the UK government, for that matter – that the court has been at pains to stress the socio-economic effects which collective redundancies may have in a given local context and social environment … For it is precisely the local community that may wither and fade away without protection from collective redundancies. Conversely, directive-relevant local dismissals which are below the thresholds do not pose the same threat to the survival of local communities," he said.
The advocate general also endorsed a recent change made in the UK which excluded redundancies occurring on the expiry of fixed-term contracts from the scope of collective consultation and from counting towards the threshold.
Employment law expert Ed Goodwyn of Pinsent Masons said that although the opinion was "potentially very good news" for employers, the potential change in legal position if the CJEU followed Wahl's reasoning would leave employers "pulling their hair out".
"Businesses have yet again been left in limbo not yet knowing whether the old or the new rules apply," he said.
"If the full CJEU follows the advocate general's opinion, some of the burden of red tape placed on UK businesses by the EAT ruling will be stripped back. While this is potentially good news for HR directors that would now be able to reduce time and money spent on gaining visibility of dismissals across complex multi-site businesses, it will mean yet another overhaul of redundancy procedures no less than a year after widespread changes were made."