ECJ’s clarification of “establishment” in redundancy consultations is good news for employers

Thousands of Woolworths and Ethel Austin staff lost their jobs in 2008 and 2010.

A decision has finally been reached in the long-running Woolworths redundancy case, which focused on whether or not employers should have to consult collectively about redundancies across multiple branches, or “establishments”.

The European Court of Justice (ECJ) today held in Usdaw and another v Ethel Austin Ltd (in administration) and others that, when deciding whether or not collective redundancy consultation obligations are triggered, the number of proposed redundancies should be measured in the entity to which the workers made redundant are assigned to carry out their duties, rather than across the whole organisation.

The decision contradicts the Employment Appeal Tribunal (EAT) decision from July 2013, where it was agreed that the phrase “at one establishment” should be disregarded if total redundancies affected 20 or more people.

Today’s verdict is a kick in the teeth” – John Hannett, Usdaw

The EAT decision effectively meant that UK employers had to initiate collective consultation when they were proposing to make 20 or more workers redundant across their whole business, rather than only when the numbers reached 20 in one unit, such as an individual retail store.

The matter dates back to 2008, when high street chain Woolworths entered administration and thousands of its staff were made redundant. Another retailer, Ethel Austin, was also forced to make employees redundant across multiple branches two years later.

“Establishments” in collective redundancy consultations

Further, detailed analysis of the ECJ decision is available here.

Shopworkers’ union Usdaw brought the case to tribunal after thousands of staff at both chains complained that they were denied a consultation period because they worked in smaller shops.

The tribunal decided that, in this case, “at one establishment” should not apply and the workers were due millions of pounds in compensation.

However, following intervention from the UK Government, the case went to the Court of Appeal last November and was immediately referred to the ECJ.

Then, in February, ECJ advocate general Nils Wahl suggested he agreed with the UK Government’s stance and that decisions on collective redundancy should be left to the national courts.

He inferred that the focus should be on whether or not there are 20 redundancies in the “local employment unit”, which could be the single store in an area, but could also be a number of stores in the local area.

The ECJ decision is welcome news for employers, unsure of whether or not they were duty-bound to consult in every location that they operate, making the redundancy consultation process more drawn out and expensive.

John Hannett, Usdaw general secretary said: “This decision marks the end of the road for our members from Woolworths and Ethel Austin seeking justice and they are heartbroken by today’s verdict.

“Our case is morally and logically robust, so today’s verdict is a kick in the teeth. It is unfair and makes no sense that workers in stores of less than 20 employees were denied compensation, whereas their colleagues in larger stores did qualify for the award.

He added: “We can now only pin our hopes on the election of a Labour government to prevent this happening again to other workers in small stores who are made redundant without proper consultation.”

Christopher Tutton, employment partner at Irwin Mitchell, said: “We have now gone full circle and re-established the ‘establishment’ test.

“Although it is not a huge surprise, with the court following the guidance from the advocate general in February, it will certainly provide relief for businesses, particularly those with multiple sites, and greater certainty on an already complex area of law.”

He added: “Last month, the Insolvency Service published a call for evidence on the collective redundancy rules for employers facing insolvency. Although the Woolworths decision has provided some comfort for business owners in the meantime, a wider policy review on this area of law will be welcome.”

Martin Warren, head of employment law at Eversheds, said that the approach taken by the EAT added little value to many employees.

“All employers, big and small, are already expected to consult with individual employees in redundancy situations. Collective consultation with employee representatives, the subject of this case, is an additional duty, aimed at larger-scale redundancies sharing common reasons,” he said.

Judgment in a similar case referred to the Belfast Industrial Tribunal, in connection with clothing chain Bonmarché, will be delivered on 13 May.

A more detailed analysis of the ECJ decision is available on XpertHR.

Additional reporting by Jo Faragher and Rob Moss.

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