The established meaning of “at one establishment” for the purposes of collective consultation in redundancy situations was turned on its head with the EAT decision in the landmark Woolworths and Ethel Austin cases in 2013.
When going through a redundancy involving 20 or more employees “at one establishment” within 90 days or less, employers are required to carry out collective redundancy consultations with its employees. The issue was the meaning of “at one establishment” under s188 Trade Union and Labour Relations (Consolidation) Act 1992 (TULCRA), and when the duty to collectively consult would therefore be triggered.
Woolworths and Ethel Austin both became insolvent in 2008, they closed their stores and made their workforces redundant. They did not go through a collective redundancy consultation process before dismissing their staff.
The initial Employment Tribunal hearing awarded compensation to staff at those stores with more than twenty employees on the basis that their employers had breached s188 TULCRA. However, Woolworths and Ethel Austin successfully argued that each individual store should be treated as a separate establishment. As a result, they were not required to collectively consult with smaller stores containing less than 20 staff, and so these employees were not awarded compensation for the failure to consult with them.
Employment Appeal Tribunal judgment
The EAT held that s188 TULCRA did not reflect the relevant EU Directive on the duty to inform and consult, which does not mention single establishments in this context. As a result, the EAT said, the words “at one establishment” should be disregarded. This meant that an employer contemplating the dismissal of over twenty employees for redundancy within a 90 day period, should collectively consult with all those employees at risk, regardless of which stores they worked in.
As Woolworths and Ethel Austin had failed to collectively consult with the staff from the smaller stores, those employees became entitled to a protective award, amounting to millions of pounds worth of compensation. This was a new development that had serious implications for all employers.
The case was appealed and referred to the European Court of Justice (“ECJ”).
In their judgment of 30 April 2015, the ECJ came to the conclusion that “establishment” in this context meant “the entity to which the workers … are assigned to carry out their duties” not the employer as a whole. It referred the question of whether stores can be classified as separate “establishments” back to the Court of Appeal to decide.
While the ECJ’s decision is good news for multi-site employers, the EAT’s decision (that “one establishment” refers to the business as a whole) will continue to stand (albeit undermined) until the Court of Appeal has given its judgment. Until then, there is still uncertainty for employers over when the duty to collectively consult arises. However, it is expected that the Court of Appeal will find stores are separate establishments, returning us to the pre 2013 judgment position. Until that time employers contemplating redundancies over a number of sites should be wary of the possible consequences of their actions and take specific legal advice.
To discuss how this decision will impact on your 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.