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Advocate General's opinion in Woolworth's case: employers now optimistic that consultation decision will be overruled

09 February 2015 #Employment


Just over a year ago, we reported that the collective redundancy case concerning the collapse of Woolworths, and which continues to cause huge concern to employers. The case was referred by the Court of Appeal to the European Court of Justice (ECJ).

Yesterday, the Advocate General to the ECJ, Nils Wahl, gave his opinion in this and some other similar cases. Whilst the full decision of the Court will not be given until a later date (it is not known when at the moment), the Advocate General’s decision gives cause for optimism for employers and the UK Government, as his opinion supports the view that UK law is not contrary to EC Directive after all. Hence, as matters stand, the Employment Appeal Tribunal’s radical ruling in the case, which changed the law in favour of employees, looks set to be overturned.

 If the full ECJ upholds the Advocate’s General’s opinion, some 3,500 former employees of Woolworths and Ethel Austin will lose their claims for compensation against the Secretary of State, following Woolworth’s insolvency

Under UK law, as it was understood before the Woolworth’s case, workplace “establishments” with fewer than 20 employees were excluded from the employer’s obligation to consult with unions and employee representatives in a collective redundancy situation (i.e. 20 or more proposed dismissals in a 90 day period). The position then dramatically changed when the EAT decided in June 2013 that the word “establishment” in the definition of collective redundancy was to be disregarded entirely, as its inclusion was, as a matter of interpretation, contrary to the EC Collective Redundancies Directive.

As a result, in the Woolworths case, compensation was no longer limited to employees who had worked at individual workplace “establishments” where more than 20 redundancies had been made.  Since the EAT decision, employers with many sites carrying out redundancies have been faced with the prospect of keeping track of redundancy proposals across entire businesses or companies in order to comply with the obligation to consult in a collective redundancy situation, with no limit in terms of “ at one establishment.”

Article 1(1)(a) of the European Collective Redundancies Directive provides member states with a choice of two possible definitions of "collective redundancy":

  • The dismissal, over a period of 30 days, of at least:
    • 10 workers in establishments with 21-99 workers.
    • 10% of the workforce in establishments with 100-299 workers.
    • 30 workers in establishments of 300 or more.Article 1(1)(a)(i)); or
  • The dismissal, over a period of 90 days, of at least 20 workers, whatever the number of workers normally employed in the establishments in question (Article 1(1)(a)(ii)).

The Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), which is designed to implement the Directive, seeks  to adopt the second of the above definitions in the UK. Under section 188(1) of TULRCA, employers are obliged to inform and collectively consult where they propose to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.

Reference to the ECJ

The Court of Appeal referred the following two key questions to the ECJ:

  • Does the phrase "at least 20" in Article 1(1)(a)(ii) of the Directive refer to the number of dismissals across all of the employer’s establishments in which dismissals are effected within a 90 day period, or does it refer to the number of dismissals in each individual establishment?
  • If it refers to the number of dismissals in each individual establishment, what is the meaning of “establishment”? In particular, should “establishment” be construed to mean the whole of the relevant business, or the part of the business contemplating making redundancies, or the unit to which a worker is assigned their duties, such as each individual store?

In the Advocate General's view, "establishment" in Article 1(1)(a) denotes the local employment unit to which the redundant workers are assigned to carry out their duties. Member States are not, however, precluded from adopting legislation that provides a greater level of protection if they choose to do so, so long as it is more favourable to all workers.

The Advocate General considered that it is for each national court to determine how the local employment unit should be defined as this will turn on the facts of each case. For example, if an employer operates several stores in one shopping centre, in the Advocate General's view it would not be inconceivable that all of those stores should be regarded as forming a single local employment unit.

The Court focused on the socio-economic effects which collective redundancies may have in "a given local context and social environment". It therefore interpreted "establishment" to mean the unit to which the redundant workers were assigned to carry out their duties. 

Guidance

The Advocate General's view is that "establishment" should have the same meaning in Article 1(1)(a)(ii) (the limb implemented by the UK in section 188 of TULRCA) and Article 1(1)(a)(i). However, the Advocate General also makes it clear that it will be for national courts to determine the extent of each employment unit and gives the example of several stores in one shopping centre potentially forming a single local employment unit.

It remains to be seen whether the ECJ will follow the Advocate General's opinion, as it is not obliged to do so. In the meantime, subject to taking detailed legal advice, the prudent approach is for employers to continue to take a cautious approach and aggregate the numbers of redundant employees across different locations when determining whether the collective redundancy obligations are triggered.

 

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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