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How does the European Court judgment in USDAW v Woolworths affect redundancies on several sites?

Collective consultation only applies where 20 or more employees are employed “at one establishment”, a decision that reduces the obligations on employers making large-scale redundancies.

The Court of Justice of the European Union (CJEU) has handed down its judgment in the long-running saga of USDAW v Woolworths. The case is of relevance to employers considering making large-scale redundancies and their employees. The official press release is here.

People will recall Woolworths (and Ethel Austin, a clothes chain in the North West of England) going into administration, resulting in the closure of a huge number of shops and redundancy for thousands of staff. The Trade Unions and Labour Relations (Consolidation) Act 1992 (TULR(C)A) (implementing an EU Directive), provides that, when an employer is contemplating collective redundancies, they must consult with workers’ representatives in order to seek agreement on certain matters. ‘Collective redundancies’ means dismissals effected by an employer for a reason not related to the individual workers concerned (predominantly redundancy), where the number of dismissals (redundancies) is at least 20 over a 90-day period.

Woolworths dismissals

In keeping with the prevailing view at the time, Woolworths only engaged in collective consultation with employees at stores with more than 20 employees. Employees at smaller stores, along with the union USDAW, brought claims for protective awards (which can be up to 90 days’ pay per employee), claiming that they should also have been subject to collective consultation. Despite losing at Employment Tribunal level, at the Employment Appeal Tribunal (EAT) the claimants were successful, with the EAT holding that the legislation should be interpreted purposively, so that an employer should be required to collectively consult whenever it contemplates making more than 20 employees redundant, regardless of the number of establishments.

The Court of Appeal considered the case, allowing intervention from the Secretary of State, arguing for the more employer-friendly interpretation, despite having been somewhat remiss in failing to apply to intervene in the EAT. The court referred the pertinent questions to the CJEU.

Now, it was certainly correct that the EAT’s interpretation of the law served the purposive approach of maximising the number of employees who would be protected by the provisions because of a requirement that their representatives be consulted in a large-scale redundancy situation. However, the trouble was that this interpretation, taken literally, was contrary to other CJEU judgments on when collective consultation obligations apply; most notably the cases of Rockfon A/S v Specialarbejderforbundet i Danmark and Athinaiki Chartopoii v Panagiotidis. The reason for this contradiction was that Denmark and Greece had implemented alternative options from the directive concerning the circumstances in which the obligations would apply.

European Court judgment

In its judgment, the CJEU was mindful of the effects of the options open to it; an enhancement of workers’ rights on the one hand, and ensuring comparable protection for workers’ rights in different member states and harmonising the costs that such protective rules entail for EU undertakings, on the other.

In the end, a consistent interpretation was preferred, with the effect that the interpretation of the words “at least 20” requires account to be taken of the dismissals effected in each establishment separately. The Court of Appeal must now decide whether each of the stores can be considered to be separate establishments, but it seems highly likely that the tribunal’s original decision – that they can (and should) be – will eventually prevail.

What constitutes an ‘establishment’ will, of course, always depend on the facts, but this case will act as a sound guide. Notably, in keeping with the previous CJEU judgments, there is no requirement that an ‘establishment’ has a management that can independently effect collective redundancies.

Redundancy dismissals at several sites

Employers with more than one site will certainly now be able to make large-scale redundancies more easily, without the requirement to collectively consult (which increases the length of time over which an unprofitable state of affairs is permitted to remain before the company can make the changes deemed necessary). On the other hand, it may deprive employers of sound suggestions by employee representatives that would enable them to implement changes in some better way. That said, employers who have good engagement with their workforce will no doubt be able to do so without the more prescriptive (and potentially punitive) requirements of TULR(C)A.

For more information or to discuss how the issues in this case might affect your business, contact our Leeds Employment Law team.

Posted on May 26th, 2015 by Lyons Davidson

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