The Advocate General wonders on Woolworths
When the retail chains Woolworths and Ethel Austin went bust, around 4,000 employees working in smaller stores missed out on the opportunity to have their trade unions or other representatives consulted with about their redundancy.
This was due to the fact that fewer than 20 employees were being made redundant within a 90 day period at each of the small sites in question. Under the terms of the UK’s Trade Union and Labour Relations (Consolidation) Act, which gives effect to the EU’s Collective Redundancy Directive, employers only need to consult in cases of ‘collective redundancy’, which is defined as cases where more than 20 staff are proposed for redundancy at one ‘establishment’.
This immediately begs the question of what exactly is an ‘establishment’. Is it (a) a single site such as shop, branch or warehouse within a multi-site business, or is it (b) the entirety of a multi-site business? The liquidators for Woolworths and Ethel Austin took the former view – hence the failure to consult with employees at smaller stores with fewer than 20 staff.
However, in 2013, the trade union USDAW won an Employment Appeal Tribunal (EAT) case on behalf of these employees, who were then entitled to claim protective awards of up to 13 weeks’ pay each relying on the EU’s Collective Redundancy Directive for a failure to consult properly.
The liquidators acting for Woolworths and Ethel Austin promptly appealed the EAT’s ruling and it has now been passed to the European Court of Justice (ECJ) for a decision on the ‘establishment’ issue, and also on whether the EU Directive can be relied on by an employee seeking a protective award against an employer that failed to consult.
A decision from the ECJ is still pending, but the Advocate General ECJ has given an opinion that is likely to be followed when the ECJ makes its ruling. The key points of the Advocate General’s opinion are:
- The concept of ‘establishment’ must have a consistent meaning across the EU Directive.
- An ‘establishment’ should be defined as a ‘local employment unit’ where the employee proposed for redundancy normally works.
- An employer shouldn’t have to aggregate their redundancies across all their sites if fewer than 20 redundancies are proposed at each ‘local employment unit’.
- What constitutes a ‘local employment unit’ should be determined by the referring Court in the USDAW case and in two other cases also considered.
- In the USDAW case, the UK hasn’t interpreted the EU Directive incorrectly, but the Court should decline to answer the question around whether an employee can rely on the Directive when seeking a protective award.
The Advocate General’s opinion will come as a relief for UK employers. Under the EAT’s 2014 ruling, companies were exposed to the potential risk of being burdened with lengthy and expensive consultation periods when making small numbers of redundancies across multiple sites. A relatively straightforward process, such as closing down four or five small and unprofitable shops within a larger chain, would suddenly become much more complex.
Assuming the ECJ follows the Advocate General’s opinion when making its decision, this should mark the end of an uncomfortable limbo period for businesses and the end of uncertainty around which rules apply to collective redundancy. At a time when many businesses are considering restructures, this decision would reduce some of the expense and red tape currently involved in streamlining or downsizing business operations.
But whilst this would undoubtedly be good news for UK business owners, the fact remains that collective consultation rules, which were only recently overhauled, remain complex in nature and are fraught with difficulties.
For more information on this or any other issue get in touch with Integra Legal at contact@integralegal.co.uk or on 0115 987 6790 in the East Midlands or 0203 478 1260 in London and the South-East.