ECJ confirm that number of dismissals need not be aggregated over multiple establishments
In what will be seen as a relief to employers throughout the UK, the European Court of Justice (ECJ) has this morning concluded that employers need not aggregate staff numbers over multiple establishments when considering their collective consultation obligations in relation to redundancies.
The requirement to collectively consult in relation to redundancies arises when a business makes 20 or more redundancies within a period of 90 days at one establishment. Following the insolvency of Woolworths and Ethel Austin, the trade union USDAW successfully argued in the Employment Appeal Tribunal (EAT) that the term “establishment” should be taken to mean the entire business and not each individual location as had long been thought. The judgment was appealed and in turn referred to the ECJ by the Court of Appeal to provide their guidance.
Today’s judgment from the ECJ has confirmed that long held belief that an establishment should be taken to mean the “entity to which the workers are assigned to carry out their duties”. In other words, each individual location should be counted as an establishment and not the business as a whole. This has provided clarity to employers that there is therefore no requirement for companies to consult with staff in a particular establishment where there are less than 20 workers at risk of redundancy.
This ECJ judgment in effect reverses the 2013 EAT decision in what has rapidly come to be known as the” Woolworths case” in which over 3,000 staff of the now defunct Woolworths and Ethel Austin stores pursued awards for lack of consultation during their redundancy.
The judgment this morning gives clarity to employers and will limit the potential liability when making redundancies spanning a number of locations. As many businesses are well aware, the liability for failing to collectively consult with workers facing redundancy can be very costly. The remedy available for individuals effected by such a failure to consult can see employers hit with a compensation payment, called a “protective award”, of up to 90 days' gross pay per employee.
Whilst this matter may now be settled as European law, we still await a referral back to the Court of Appeal for it to decide that the decision of the ECJ applies to UK law it should be. In the meantime however, we recommend that employers err on the side of caution and still consider aggregating staff numbers over multiple establishments for the purposes of collective consultation in a redundancy situation.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.