Woolworths redundancy case: six years on and clarity at last?

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Woolworths' closing down sale in Henley-on-Thames. Photo: Geoffrey Swaine/REX

DLA Piper’s latest case report examines the next steps in the recent Woolworths redundancy case at the ECJ, which examined the retail chain’s failure to consult employees on their redundancies, and the implications of the decision for employers.

Decision

The European Court of Justice (ECJ) has handed down its judgment in the reference from the Court of Appeal in Usdaw and another v Ethel Austin Ltd (in administration) and others – commonly referred to as the Woolworths redundancy case – on the question of when the obligation to consult on collective redundancies is triggered.

In a decision that is welcome news for employers, the ECJ held that the requirement for collective consultation is triggered when the employer proposes 20 or more redundancies within 90 days at one establishment, not across the entire undertaking.

This returns the law to how it was before the decision of the Employment Appeal Tribunal (EAT).

Background

When the Woolworths and Ethel Austin chains of stores became insolvent, the administrators implemented extensive redundancy exercises. No collective consultation was carried out and redundant employees brought claims for protective awards for failure to consult.

The tribunal made protective awards only in respect of those employees who worked in stores employing 20 or more staff.

However, on appeal, the EAT held that UK law was not compliant with the Collective Redundancies Directive, and that the obligation to consult on collective redundancies arises whenever there are 20 or more redundancies anywhere in an employer’s business.

The Court of Appeal referred the Woolworths redundancy case to the ECJ to determine the proper meaning of “establishment” under the Directive.

In its decision, the ECJ stated that the term “establishment” is a term of EU law and cannot be defined by reference to the laws of the member states. It must be interpreted in a uniform manner across the EU.

In previous cases, the ECJ has already decided that the “establishment” is the unit to which the workers made redundant are assigned to carry out their duties. And that the unit need not have management that can independently effect collective redundancies.

It noted that interpreting the Directive to require account to be taken of the total number of redundancies across all of the establishments of an undertaking would significantly increase the number of workers eligible for protection. This would correspond to one of the objectives of the Directive.

The ECJ said that this is not the Directive’s only objective. It is also to ensure comparable protection for workers’ rights in different member states and to harmonise the costs that these protective rules entail for EU undertakings.

Employers can handle redundancies at different establishments separately. This is likely to enable businesses to engage in shorter, simpler and less costly periods of redundancy consultation”

Its conclusion was that the Directive requires the dismissals effected in each establishment to be considered separately.

Implications of the decision

The ECJ’s decision will be particularly welcome news for large employers operating across many establishments.

In contrast, the EAT’s decision had created significant problems as it meant that 20 separate redundancies at 20 separate establishments could trigger collective consultation requirements, even though the reasons for the redundancies were disparate and separate.

Following the EAT’s decision, many large employers have been constantly monitoring their operations for any dismissal that might be categorised as a redundancy because of the risk that this could trigger collective consultation obligations.

This has required a national approach for many businesses, and an international approach for others.

As well as imposing a large administrative burden, the requirement to tally redundancies across their entire business has also resulted in employers being obliged to engage in long, complex collective redundancy consultation exercises, with a resulting increase in costs.

The ECJ’s decision produces a much more sensible result. It marks a return to the old law, which will be particularly welcome news for multi-site businesses.

In the majority of cases, employers can take this decision as clearance to handle redundancies at different establishments separately. This is likely to enable businesses to engage in shorter, simpler and less costly periods of redundancy consultation.

Spanish and Northern Irish references

On 13 May 2015, the ECJ published its decisions in two more cases covering much the same ground as the Woolworths case:

The outcome will be particularly important in sectors such as retail, hospitality, transport and logistics where individual shops, hotels, restaurants or depots may now be treated as separate establishments.

This will make collective consultation much easier to manage than would have been the case if the ECJ had upheld the EAT’s interpretation of the law.

What happens next?

The Woolworths redundancy case now returns to the UK Court of Appeal. It will need to determine whether or not the employment tribunals were correct in taking the view that the individual Woolworths and Ethel Austin stores to which the employees affected by the dismissals were assigned were separate establishments.

What constitutes an establishment has been considered previously both by the ECJ and by the UK courts. According to the leading ECJ case, Rockfon A/S v Specialarbejderforbunet i Danmark, acting for Nielsen and others, “establishment” means, “the unit to which the workers made redundant are assigned to carry out their duties”.

There is no need for an establishment to have management that can independently effect collective redundancies. Nor need it have legal, economic, financial, administrative or technological autonomy from the rest of the business, or require geographical separation from the other units or facilities of the undertaking.

In view of this clear ECJ case law, and that defining the relevant establishment is a question of fact for the tribunal in each case, it seems likely that the Court of Appeal will decide that the individual stores at Woolworths and Ethel Austin were separate establishments.

However, employers are nonetheless likely to be interested in the outcome as further UK guidance may be provided on the concept of “establishment”.

Adam Hartley

About Adam Hartley

Adam Hartley is a partner at DLA Piper.
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