Law

Memery Bank - Collective Consultation

By Merrill April, Sarah Martin & Lara Shillito; Memery Crystal LLP

The European Court of Justice (ECJ) has ruled in favour of the UK Government in the landmark USDAW and another v WW Realisation 1 Ltd (in liquidation) and others (C-80/14) (the Woolworths case), ruling that the obligation to collectively consult is triggered where an employer proposes 20 or more redundancy dismissals within 90 days ‘at one establishment’, not across the entire business.  It further held that an ‘establishment’ is the entity to which the workers made redundant are assigned to carry out their duties (for example, an office, construction site, shop).  On 13 May the ECJ reaffirmed this decision in Lyttle and others v Bluebird UK Bidco 2 Limited (the Bluebird case) and held that a single retail store is capable of being an ‘establishment’.

Under s.188(1) TULRCA employers are obliged to inform and collectively consult with employees where they propose to dismiss 20 or more employees for redundancy within 90 days ‘at one establishment’.  Failure to inform and consult may result in up to 90 days' pay being awarded to each affected employee as a protective award.  

The Woolworths case…

The Woolworths case came out of the redundancies of over 28,000 employees following the insolvent administrations of the Woolworths and Ethel Austin retail chains.  The Union of Shop, Distributive and Allied Workers (USDAW) tried to obtain protective awards for the employees in relation to the employer’s failure, they claimed, to properly inform and consult with employee representatives. The Employment Tribunal held that around 4,400 employees were not entitled to protective awards as they worked in outlets (‘establishments’) with less than 20 employees and therefore did not have a right to be collectively consulted.  

The USDAW appealed, arguing that the existing UK law did not correctly apply EU law; that the words ‘at one establishment’ should be disregarded for the purposes of a collective redundancy involving 20 or more employees.  The EAT agreed and held that collective consultation obligations arose regardless of whether 20 or more affected employees were employed at the same or different locations of one employer.

In light of the employer’s insolvency, the Secretary of State was in line to foot the bill for the payment of protective awards to all the relevant workers in Woolworths.  Unsurprisingly, it appealed the EAT decision and the Court of Appeal referred various questions regarding the obligation to collectively consult to the ECJ.   

What the ECJ held in the Woolworths case...

The ECJ has confirmed that there is no requirement under EU law for an employer to take account of the number of proposed dismissals across all of its establishments (such as sites, offices and shops) when determining whether the threshold number for collective redundancy consultation has been reached.  In other words, the establishment test is still relevant.

In previous cases the ECJ has held that ‘establishment’ must be interpreted as “the unit to which the workers made redundant are assigned to carry out their duties” i.e. an individual workplace as opposed to the entire business.  An establishment may consist of a distinct entity, having a certain degree of permanence and stability, which is assigned to perform one or more given tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks. However, it is not essential for the unit to have legal, economic, financial, administrative or technological autonomy, or a management that can independently effect collective redundancies.

What does this mean for employers?

The ECJ’s decision in Woolworths leads the way for the Court of Appeal to overturn the decision of the EAT and for UK domestic law to return to the pre Woolworths case position; that it may be possible to treat individual sites or premises as individual establishments (or local employment units) for the purpose of determining whether the obligation to collectively consult has been triggered. Although the ECJ has not said that each store should be a single establishment, the ECJ’s later decision in the Bluebird case as referred to above suggests this would be permissible.    

This will be good news for businesses with multiple sites as it will lead to less costly and time consuming redundancy exercises as employers will only have to collectively consult where 20 or more staff at one establishment are to be made redundant within a period of 90 days.  By way of a couple of practical examples….

Group A has 4 shops in London, Bristol, Manchester and Leeds.  It proposes to make 35 redundancies nationwide within a 90 day period.  

Shop location

Number of employees in each shop

Number of employees to be made redundant in each shop

Is collective consultation required?

London

44

21

Yes

Bristol

12

7

No*

Manchester

32

19

No*

Leeds

8

4

No*


*Provided each shop/site can be considered an ‘establishment’ (e.g. a distinct entity with a certain degree of permanence and stability and which is assigned to perform one or more given task, with a workforce/organisational structure to carry out those tasks).   

In this scenario the Group also has a Manchester pop-up shop with 4 employees open from May – July only.  The pop-up shop works in conjunction with the permanent Manchester shop. Although this shop has only just opened Group A decides to make all of the staff redundant. This pop-up shop is unlikely to satisfy the permanence and stability tests to be considered an ‘establishment’.  As such the employees should be considered part of the permanent Manchester shop and the proposed redundancies will tip the Manchester shop into the collective consultation regime.

Group B has 15 office sites nationwide.  10 of these sites are large with over 100 employees at each site and 5 of these sites are small with less than 50 employees at each site.  Each site is distinct from the other and staff are employed and organised according to their particular office.  Group B makes 2,000 redundancies nationwide across each of its sites. More than 20 employees will be made redundant at each of the 10 large sites, and less than 20 employees will be made redundant at each of the 5 small sites.  The redundancies will occur within a 90 day period.

At the 10 large sites collective consultation obligations will be triggered whereas at the 5 small sites it is arguable they will not. However, the Company is concerned that employees being made redundant from the smaller sites may question why they are being treated differently to those being made redundant from the large sites.  

There is nothing to prevent an employer electing a representative/representatives for collective consultation purposes for each of the sites across the business, including those where fewer than 20 employees face redundancy.  This may be the necessary approach for employers who do not want to fall foul of procedural failings where there are questions over whether factually particular work sites can be considered as ‘establishments’ in their own right.  Also it may be appropriate from an employee relations perspective to ensure that the workforce is (and feels) fully informed and engaged in a large change programme and to consult across all sites, regardless of the number of proposed redundancies at each.

Each individual case turns on its own facts and therefore employers should seek advice before making redundancies of over 20 employees.


Merrill April
Memery Crystal LLP; London, UK
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Sarah Martin
Memery Crystal LLP; London, UK
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Lara Shillito
Memery Crystal LLP; London, UK
E This email address is being protected from spambots. You need JavaScript enabled to view it., W: www.memerycrystal.com

 

 

 

 

 


Published: July 2015

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