Following recent headaches caused by European court decisions on calculations of holiday pay, there is potential good news for employers regarding their obligations in collective redundancy situations.
In the UK, under the terms of the Trade Union and Labour Relations (Consolidation) Act 1992, employers have an obligation to collectively consult employee representatives where they propose to make redundant “20 or more employees at one establishment within a period of 90 days or less”.
In Usdaw & Wilson v Woolworths and others, the question of what is meant by “establishment” in the legislation was asked of the Court of Justice of the European Union (CJEU). Although Woolworths (and the other employers who are named in related cases) employed thousands of people, they operated a number of units which, individually, had fewer than 20 employees. If “establishment” was taken to mean a company as a whole (or a large part of it), then the duty to collectively consult would apply in respect of all employees. However, if “establishment” referred to individual stores of themselves, the obligation to consult would not extend to employees working in any unit in which fewer than 20 redundancies were being proposed or made.
Advocate General Wahl has recently given his opinion on this issue. Based on previous case law of the CJEU and what he considered to be the purpose of the legislation, he concluded that “establishment” does not refer to a business as a whole, but to a ‘local employment unit’. He stated that it is for national courts to decide what constitutes a ‘local employment unit’ in any given situation. He gave the example that several stores within one shopping centre may be a local employment unit and therefore an establishment for redundancy purposes.
If the CJEU chooses to follow this opinion, it will be a significantly helpful decision for employers as it limits their obligations and associated liability. For example, 4,500 of the employees of Woolworths were employed at stores with fewer than 20 employees, meaning the provisions on collective consultation would not apply to them (on the assumption those stores’ locations did not make them a “local employment unit”). Breach of the obligations can lead to protective awards being made against employers of up to 90 days pay for each employee. Therefore, limiting the number of employees covered by the provisions also limits the potential for such awards.
Additionally, the Advocate General’s view will also make it much easier for employers to plan any potential restructure which may lead to redundancies. Rather than having to consider the business as a whole and review how many dismissals may be made within any 90 day period, they can focus on individual sites when considering whether collective consultation obligations will kick in. This is likely to drastically reduce the number of occasions where such obligations apply and will allow for more streamlined procedures to be adopted, albeit individual consultation will still be required as with all potential redundancy situations.
The opinion of the Advocate General is not binding on the CJEU. While the court follows these opinions in the majority of cases, it is always open to them disagree. The full court is expected to rule on the issue later this year. Until it does, employers may wish to take a cautious approach to any potential redundancy situations and give detailed thought as to whether to engage in collective consultation where sites with less than 20 employees are affected.
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