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 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:
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.
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.