Collective redundancies: the return of the ‘Establishment’.

UK legislation (under TULRCA) states that where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less it is required to carry out collective consultation with representatives of the affected employees.

You will be aware that the EAT, in the widely publicised ‘Woolworths case’,  decided that the UK had interpreted the European Directive incorrectly when drafting TULRCA and that the words ‘at one establishment’ should never have been included and should therefore be ignored. This decision sent shock waves through the ‘multiple establishment business’ community and was contrary to years of practice.

The impact was significant for businesses as it extended the requirement to consult collectively to cover many more redundancy scenarios. Given the significance of the decision, the Secretary of State for BIS appealed.

Last week the Advocate General (AG) of the ECJ delivered his opinion about the extent of the employer’s obligation to consult collectively in redundancy situations.  He was asked to consider whether the 20 employee trigger for collective redundancy consultation applies per employer or per establishment.

And the AG said… that the UK Government had correctly implemented the European Directive. He noted that the aim of the Directive was to protect workers where large numbers of local redundancies were being made. This meant that the ‘establishment’ in question had to be the local employment unit to which employees were assigned to carry out their duties. Determining that unit will remain a question of fact for the Tribunal. But, crucially, employers are not required to aggregate dismissals across multiple establishments for the purpose of determining whether the threshold for collective consultation has been met.

Assuming the ECJ agrees with the AG, it is likely the duty to consult collectively will revert to the original position under TULRCA and will only arise where 20 or more redundancies are proposed at one ‘establishment’, rather than across the whole business. The AG suggests that it should be up to the court to determine the meaning of the word ‘establishment’ where the employer has multiple sites within a locality.

Note that the ECJ is not bound by the AG’s opinion – though it usually does follow it! If the AG’s opinion is followed in due course by the ECJ, it represents good news for employers, significantly reducing the legal, financial and administrative burden on businesses that are carrying out smaller scale restructuring across multiple sites.

However, until the ECJ issues its decision on this (which normally follows around six months after the AG’s opinion), it would be best for employers to continue to disregard the words ‘at one establishment’ when calculating whether they have reached the threshold for collective redundancy consultation.

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