Media Briefing Note: Europe to Hear Collective Redundancy Case
19 November 2014
LONDON, 19 November 2014 - On Thursday 20 November the European Court of Justice (CJEU) will hear the case USDAW v Ethel Austin, referred by the Court of Appeal, concerning whether redundancies must take place "at one establishment" to trigger collective redundancy consultation obligations. The case Lyttle v Bluebird UK Bidco 2 Limited, referred from the Northern Ireland Industrial Tribunal on similar issues will be heard at the same time.
Ed Bowyer, partner in Hogan Lovells employment team, commented:
"The legislation governing collective dismissals states that a duty to consult arises only where 20 or more dismissals are proposed at "one establishment". In USDAW v Ethel Austin the Employment Appeal Tribunal (EAT) decided that to comply with underlying European law the words "at one establishment" had to be ignored. When the case reached the Court of Appeal it was referred to CJEU.
"The EAT decision was significant because it expanded the range of situations in which collective redundancy consultation is required. Pending clarification from the CJEU about whether the existing legislation is consistent with European law, employers must assess their collective consultation duties on the basis of counting all employees being made redundant within a 90 day period, regardless of their place of work. This gives rise to a number of practical difficulties, as well as imposing consultation obligations where none would previously have existed. The CJEU hearing is the next stage to resolving the uncertainty caused by the EAT decision."
In 2012 Woolworths went into administration, followed by liquidation. No buyer was found for the business, all 814 stores closed and 27,000 retail employees were made redundant. Collective consultation obligations were triggered and the Employment Tribunal (ET) ordered a protective award because those obligations had not been met in full.
However the ET decided that only employees at stores with 20 or more employees could benefit from the protective awards made. The ET held that each store was an establishment, rather than the retail operation as a whole. Since UK legislation requires the dismissals to be "at one establishment", this meant that there was no duty to consult in respect of redundancies at the stores with fewer than 20 employees and those employees could not benefit from a protective award.
The rationale behind the ET's decision was that each of the stores was a physically distinct premises with its own organisation, headed by its own store manager. Employees were not peripatetic; they worked only at one particular store.
Although the ET's decision reflected the approach that has been taken in recent years in the UK and the terms of the legislation, it was successfully appealed in July 2013, along with a similar decision relating to Ethel Austin, another chain of stores.
The EAT held that UK legislation is inconsistent with the European Directive which it was intended to implement – in the latter the duty to consult (according to the EAT) applies even where the dismissals are at different establishments. Its proposed remedy was to remove the words "at one establishment" from UK legislation, sparking concern and uncertainty for employers across the country.