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Woolworth's case: ECJ upholds UK law in welcome decision for employers

30 April 2015 #Employment


In a much welcomed decision for employers, the European Court of Justice in the Woolworths/Ethel Austin case has followed the decision of the Advocate General  which we reported on 6 February 2015 (Advocate General's opinion in Woolworths' case: employers now optimistic that consultation decision will be overruled).

This means that the European Court of Justice has effectively overruled the EAT’s highly controversial decision in the Woolworths case, in which the EAT held that UK law on collective redundancies was in breach of the EU Collective Redundancies Directive (No.98/59).  It confirms  that ‘establishment’ in the collective redundancy legislation refers to an individual workplace/establishment, not the employer’s organisation/undertaking as a whole . The establishment is then the entity to which the workers made redundant are assigned to carry out their duties.

Hence employers with more than one site do not need to aggregate all proposed redundancies across its various sites where each site is an establishment in its own right.

The European Court of Justice has confirmed that:

  • Applying  ECJ case-law, including the Rockfon case, where an ‘undertaking’ comprises several entities, under S.188 of the Trade Union and Labour Relations (Consolidation) Act 1992, collective consultation is required only at those establishments where it is proposed to dismiss 20 or more employees. There is no requirement for dismissals at all establishments to be aggregated for the purpose of this threshold and so the TULR(C)A is not incompatible with the Directive in this regard.
  • is not essential in order for there to be an ‘establishment’ that the unit in question is endowed with a management that can independently effect collective redundancies.
  • an ‘establishment’, in the context of an undertaking, may consist of a distinct entity, having a certain degree of permanence and stability, which is assigned to perform one or more given tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks.
  • the terms ‘undertaking’ and ‘establishment’ are different and an establishment normally constitutes a part of an undertaking. That does not, however, preclude the establishment being the same as the undertaking where the undertaking does not have several distinct units.
  • the entity in question need not have any legal autonomy, nor need it have economic, financial, administrative or technological autonomy, in order to be regarded as an ‘establishment’.

Many Woolworths and Ethel Austin stores across the UK closed after the companies went into administration, resulting in the dismissals for redundancy of thousands of employees. The trade union USDAW, which represented the employees, sought protective awards on their behalf in respect of the companies’ failures to inform and consult under S.188 TULR(C)A. A key question that arose in the proceedings was whether the consultation provisions were triggered in respect of stores and workplaces at which fewer than 20 employees worked, given that the consultation obligation arises only where it is proposed to dismiss 20 or more employees within 90 days at one ‘establishment’. The tribunals found that individual branches were discrete ‘establishments’, meaning that there was no duty on the administrators to consult on redundancies at any branch with fewer than 20 employees. However, on appeal, the EAT held that by including the words ‘at one establishment’ in S.188 TULR(C)A, the UK had failed properly to implement the Collective Redundancies Directive, and that those words had to be deleted to achieve a compatible interpretation.

In the Woolworth’s case, it is now for the Court of Appeal to establish whether the employment tribunal’s decision (overruled  by the EAT) was based on a proper interpretation of UK law, in the light of the ECJ’s clarification of the Directive. Thus, although the ECJ has not conclusively determined on the facts of the case that each individual store should be considered a separate establishment, its judgment confirms that this was a permissible approach for the original tribunal to take. In light of its judgment, confirming that the EAT’s approach was wrong and which  returns us to the legal position that applied before the Woolworth’s case,  there is no reason to believe that the Court of Appeal will not find that the employment tribunal’s approach was the correct one all along.

The ECJ’s judgment will make it significantly less likely that collective consultation obligations will apply where employers are conducting reorganisations  over a number sites.

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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