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Emma O'Connor
Emma O'Connor,
HEAD OF TRAINING
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Meaning of “Establishment” – Advocate General gives his opinion
06 February 2015

The on-going saga in the “one establishment” debate in collective redundancy cases has taken another twist with the Advocate General expressing an opinion that EU rules on collective consultation do not require employers to count all potentially redundant employees across the whole business when considering if the potential numbers of redundant employees reaches 20 or more.  Instead, employer’s need only consider an individual “local employment unit”.

Background

The long-running cases concerning redundant employees from now defunct companies Woolworths and Ethel Austin, dates back to 2008. Following the administration of both companies, employees were made redundant. Where the numbers of employees at particular branches was 20 or less, the Administrators did not collectively consults – there were relying on the definition under collective consultation rules of “one establishment”. Legislation states that employers have to collectively consult for redundancy purposes where the proposed number of redundant employees is 20 or more “at one establishment” within 90 days. However, Unions argued that Administrators should have taken the entire workforce as “one establishment” and therefore collectively consulted with all affected employee. The EAT agreed with the Unions and held that for the purposes of collective consultation, employers should disregard the words “at one establishment” and take the whole workforce as one establishment. The decision resulted in millions of pounds worth of compensation for the redundant employees and great uncertainty for employers.

The question of whether employers could rely on the definition of “one establishment” was referred to the European Court of Justice. The Advocate General – a lawyer who advises the court – has come back with his opinion.

Advocate General’s opinion

Significantly, the Advocate General has disagreed with the approach taken by the EAT. He has said that, in his opinion, that the EU Collective Consultation Directive (which is what our domestic rules concerning collective consultation are based) is about mitigating the effects of multiple redundancies in a local area and not nationally. The focus and the need to collectively consult are based on the impact on a “local employment unit”.

Will the opinion be followed?

We should stress that the Advocate General’s opinion is just that – an opinion. It is not binding on either our domestic courts or the European Court. However, in the majority of cases the Advocate General’s opinion is followed by the European Court.

What should employers be doing now?

We do not have a definitive answer and any full judgment of the European Court is not expected until later this year. Then, of course, the case has to return to our domestic courts for a finding (which could then be appealed!). So, unfortunately, there is still uncertainty for employers over when the duty to collectively consult arises. Do employers collectively consult based on “one establishment” or as a business as a whole? Unless and until we have a finding from our domestic courts, the EAT decision stating that employers look at numbers of possible redundancies across a whole business within 90 days is still binding (albeit undermined). 

To discuss this opinion and how it could affect your individual business, please contact our Employment Team on 0118 952 7284. 

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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