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The Establishment Strikes Back – Iqbal Mohammed

Iqbal Mohammed

Iqbal looks at the recent decision in the Woolworths case affecting collective consultation on redundancies.

THE ECJ handed down judgement yesterday on the meaning of “establishment” in the EU Collective Redundancies Directive. It held, overruling USDAW v Ethel Austin Limited (“Woolworths case”) that the duty to consult over collective redundancies is triggered where employers propose to make 20 or more redundancies within 90 days, per establishment (or “local employment unit”) not overall in the business.

In 2013 I sent out an e-shot and gave a seminar on the significance of the decision in USDAW v Ethel Austin Ltd [2013] UKEAT/0547/12/KN, offering my prediction that the EU’s employment friendly ECJ would support its conclusion that s. 188, Trade Union and Labour Relations (Consolidation) Act 1992 failed implement the EU Collective Redundancies Directive (No.98/59) properly.

The EAT had held that the words “at one establishment” in s. 188 did not originate from the Directive and were not debated in Parliament. Applying Ghaidan v Godin Mendoza [2004] 2 AC 557, the EAT held that it was obliged to go as far as possible to purposively construct s. 188 and comply with the Directive.

Consequently, the EAT deleted the words “at one establishment” from section 188 as a matter of construction. This, in one fell swoop, extended the right of collective consultation, or in its absence a protective award, to significantly more employees than previously as the question became whether there were 20 employees or more in aggregate being made redundant across all sites, not in one site.

The Advocate General’s opinion

On the Court of Appeal’s referral to the ECJ, there was some glimmer of hope when the Advocate General’s opinion on 5 February 2015 concluded that “establishment” must be construed in the same way throughout the Directive and meant “the local employment unit to which the redundant employees are assigned to carry out their duties.” Further, the “local employment unit” was a matter of fact to be determined by national courts.

His view was that the UK had correctly implemented the Directive. While it was open to national governments to make collective redundancy obligation apply where the total redundancies in aggregate are 20 or more, this was going beyond the Directive. At this point I started selling off shares in my original prediction!

ECJ Ruling

Yesterday, upsetting the UKIP narrative on Europe’s overregulation, the ECJ held that where a business comprises several undertakings, “establishment” refers to that entity where the redundant workers are assigned to carry out their duties—that is, their local place of work. This reverses the significant burden placed on employers by the original ruling, which extended collective consultation dramatically.

Whether the stores in the Woolworths case are one “establishment” has been referred back to the Court of Appeal to determine, it being a matter for the national courts to consider.

Practice Point

While the Court of Appeal is yet to rule on the facts of the Woolworths case, large employers considering making redundancies across a number of sites are likely to be safe treating each site separately for the purposes of considering their collective redundancy obligations without needing to aggregate the total employees.

Those employers currently undertaking collective consultation on the law as it previously stood should seek specific advice.

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