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In the much anticipated judgment in the Woolworths and Ethel Austin cases, the ECJ confirmed that the law does not require that the number of dismissals in all of an employer's establishments be aggregated in order to determine whether the threshold for collective redundancy consultation is met. In another recent case (Lyttle v Bluebird), the ECJ confirmed that a single retail store is capable of being an “establishment” for these purposes.
The employer’s obligations in relation to collective redundancy consultation are set out in the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), which implements the European Collective Redundancies Directive. Under 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. Where an employer fails to comply with the collective consultation provisions, an employment tribunal may make a protective award of up to 90 days' gross pay for each affected employee. Redundancy for these purposes is defined widely and would include dismissals as part of a change in terms and conditions exercise.
The law was thrown into disarray by the Employment Appeal Tribunal (EAT)’s decision in USDAW v Woolworths where the EAT found that the obligation to collectively consult applied whenever an employer was proposing to make 20 or more redundancies within 90 days across the whole of their business (not at any one establishment, as had previously been understood).
The ECJ’s judgement now reverses the position and confirms that employers will only need to engage in collective consultation where 20+ redundancies within 90 days are proposed at any one establishment (not across the whole business). Therefore, if an employer proposes to make 20 or more redundancies across the business, but no more than 19 at any one establishment, they will not be under any obligation to collectively consult.
It is not always straightforward to know what constitutes an “establishment” for the purposes of the legislation and a number of factors will be taken into consideration. If an employer operates from a number of different sites, each site will not necessarily be an establishment. But if a site has an element of distinctness, performs specific tasks and has a management structure of its own, it is more likely that it will be an establishment. It is also possible to have a number of establishments operating from any one site. In Lyttle v Bluebird, the ECJ applied these tests and determined that a single retail store was capable of being an establishment.
Following the EAT’s USDAW v Woolworths decision, many employers have taken a cautious approach to collective redundancy consultation and preferred to engage in collective consultation even where 20 or more redundancies were not proposed at any one establishment (but rather the total number of redundancies across the business was 20 or more). Following the ECJ’s recent judgments, employers will be able to establish with greater clarity when the threshold of 20 employees is reached and can be reassured that if less than 20 redundancies are proposed at one establishment, the collective consultation obligation will not apply.
It will still not always be obvious what constitutes an establishment and for employers who, for example, run services from different sites located closely together caution needs to be taken when large redundancy programmes are being implemented.
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