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Employers breathe a collective sigh of relief as the ‘Woolworths’ case is decided

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01/05/2015

The Court of Justice of the European Union (CJEU) rules on ‘one establishment’

In a judgment ending all speculation on the point, the CJEU has ruled that the words, ‘one establishment’ in section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A) refer to the separate workplace to which the individual is assigned rather than the entire business.  In doing so, the CJEU has effectively followed the Advocate General’s opinion issued earlier this year and provided employers with welcome clarification on how to determine when the threshold for collective redundancy consultation is met.

The effect of the CJEU decision is to return the rules on collective redundancy to the ‘status quo’ that existed before the controversial decision of the Employment Appeal Tribunal (EAT) in 2013 that saw many employers having to aggregate proposed redundancy numbers across their entire business rather than at the affected site only.

A quick reminder of the issues
  • In 2013, the EAT held that the words ‘at one establishment’ should be deleted from s.188(1) of TULR(C)A in order to bring it into line with the EU Collective Consultation Directive.
  • This had a massive and onerous impact on many UK employers, especially those operating from a number of sites.  The decision meant that employers had to aggregate proposed redundancies across all their UK sites for the purposes of determining whether the ‘collective redundancy’ threshold of 20 (or 100) proposed redundancies would be met in any rolling 90-day period.  Failure to do this carried the risk of being in breach of TULR(C)A and exposure to claims for substantial amounts of compensation.
  • The EAT’s decision was appealed to the Court of Appeal which referred the point regarding the interpretation and implementation of the Directive to the CJEU.
  • The Advocate General gave his opinion in February 2015 as a precursor to the CJEU hearing the case.  In doing so he addressed the concern that, if the ‘one establishment’ wording remained in place, many workers dismissed over the course of an overall redundancy exercise would not be entitled to the protection that the collective redundancy rules provide.  He stated that whilst this was so, it was not contrary to the Directive because the aim of the Directive was not to provide full protection for all employees but to provide a minimum level of protection in a collective redundancy situation.
  • On 30 April 2015, the CJEU handed down its decision.  It held that the words, ‘one establishment’ refer to the entity to which the individual is assigned to perform their duties and does not encompass the employer’s entire operation.  In other words, there is no need to calculate redundancy headcount across the whole business but only at the affected site.
  • The case has been referred back to the Court of Appeal by the CJEU which, in view of the CJEU’s determination, should reverse the EAT’s decision.
How does this affect employers?

Employers who have continued during this period of uncertainty to adopt the ‘pre-Woolworths’ approach to collective consultation (as many did) are now able to do so in the knowledge that exposure to claims is far reduced.  Any financial provision for risk of claims can be re-assessed and probably reduced.

  • Those employers who have been under pressure from Unions or employee bodies to change their collective redundancy processes in light of the EAT decision will be able to rely on the CJEU ruling to draw a line under any ongoing discussions.
  • Employers who followed the EAT’s decision and, consequently, aggregated redundancy numbers across sites can adopt the ‘pre-Woolworths’ approach in relation to future exercises.  This will be welcome news to many HR teams who had been struggling with the sheer and unwieldy logistics of co-ordinating and calculating redundancy numbers across an entire UK business.
  • Employers who are part way through a collective redundancy exercise and have calculated the threshold for collective consultation based on the EAT decision should consider how best to proceed in view of the CJEU’s ruling. Employers should be wary of simply ‘reversing’ out of ongoing collective redundancy procedures without first taking advice on the potential risks involved.  A risk/benefit analysis will be required that takes into account not only the legal risks but also considers the industrial relations/PR issues.
  • As was the case before the EAT’s decision, it is still important to assess whether ‘one establishment’ incorporates a single site or a number of sites which are local to each other or which have related functions.  If, for example, a retailer has a number of units in a shopping centre then it is possible that, by virtue of their proximity or other connecting factors, the units could be classed as one establishment for the purposes of TULR(C)A.  If in doubt, employers should always seek advice on this point.

Walker Morris’s experienced employment team are able to assist with any issues arising from this case.  Please contact Andrew Rayment for further advice.

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