05 February 2015

The Advocate General (AG) has today delivered his opinion about the extent of the employer's obligation to collectively consult in redundancy situations following a referral by the Court of Appeal to the Court of Justice of the European Union (ECJ). (USDAW and Wilson (Case C-80/14) more widely known as the Woolworths case).

The issue

Section 188 of Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), which implements the European Collective Redundancies Directive (Directive 98/59) (the 'Directive'), 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.

However, the EAT in Woolworths, decided that the UK had interpreted the Directive incorrectly when drafting TULCRA and that the words 'at one establishment' should never have been included and should therefore be ignored. This means that the obligation on employers to collectively consult with affected employees arises more frequently than before.

The facts

The case involved claims for protective awards by ex-employees following the insolvency of high street stores Woolworths and Ethel Austin. Around 4,500 employees had been denied an award for failure to consult as the Tribunal found that the obligation to collectively consult was not triggered as it viewed each store as a separate 'establishment' and there were fewer than 20 proposed redundancies in each of the stores in question.

This decision was overturned by the EAT, which held that the words 'at one establishment' should be disregarded and that the duty to consult collectively would arise where 20 or more redundancies are proposed across an employer’s business as a whole, rather than at just one 'establishment'.

The impact of the decision 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 to the Court of Appeal.

The referral

The Court of Appeal made a reference to the ECJ on two points:

1. Whether the words 'at one establishment' in section 188 of TULRCA should be disregarded as they are incompatible with the Directive.

2. Whether the Directive has direct effect against the Secretary of State.

Advocate General's opinion

In his opinion the AG considered that the ECJ should find, contrary to the EAT decision in Woolworths, that the words 'at one establishment' are not incompatible with the Directive.

In his view, the establishment is the unit to which the redundant employees are assigned to carry out their duties and it is for the national courts to determine what the local employment unit is in each case. For example, it could be two or three stores which the employer owns in the same shopping centre. However, it is not necessary to look further than the local employment unit and aggregate the dismissals across all the employer’s establishments for the purpose of determining whether the threshold for collective consultation has been met.

In the AG's opinion, the UK has not failed to transpose the Directive correctly and so the AG suggests that the ECJ does not need to go on to consider the second question as to whether the Directive has direct effect.

Assuming the ECJ agrees with the AG, it is likely that the Court of Appeal will eventually overturn the EAT’s decision and that the duty to collectively consult 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.

However, whilst we await the ECJ's decision, employers should continue to follow the EAT decision and should carry out collective consultation with all affected employees where 20 or more redundancies are proposed across their business as a whole.

Assuming the AG’s opinion is followed in due course by the ECJ, this opinion represents good news for employers, significantly reducing the legal and administrative burden on businesses that are carrying out smaller scale restructuring across multiple sites.

If you would like more information, or specific advice, please contact Roger Bull, head of the Employment law team, or your usual Burges Salmon contact.

Key contact

Roger Bull

Roger Bull Managing Partner

  • Managing Partner 
  • Employment Disputes
  • Strategic HR Projects

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