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ECJ confirms ‘establishment’ for collective redundancies means the entity to which the workers are assigned

In USDAW v Ethel Austin Ltd, while the collective consultation obligations under UK law apply where an employer is proposing to dismiss as redundant 20 or more employees “at one establishment”, the EAT ruled that the words "at one establishment" are to be disregarded to comply with EU law, meaning that all proposed redundancies across a multi-site unit have to be added together.

In USDAW v Ethel Austin Ltd, while the collective consultation obligations under UK law apply where an employer is proposing to dismiss as redundant 20 or more employees “at one establishment”, the EAT ruled that the words “at one establishment” are to be disregarded to comply with EU law, meaning that all proposed redundancies across a multi-site unit have to be added together. The Court of Appeal referred the case to the ECJ and if the EAT’s decision stood, this could have brought about a significant change to UK law.

The ECJ, however, agreed with the Advocate General’s opinion in Union of Shop, Distributive and Allied Workers (USDAW) and B. Wilson v WW Realisation 1 Ltd (in liquidation), Ethel Austin Ltd and Secretary of State for Business, Innovation and Skills and has confirmed that where an undertaking comprises of several entities, the term ‘establishment’ in the Directive on collective redundancies consultation must be interpreted as referring to the entity to which the workers to be made redundant are assigned to carry out their duties.

The ruling means that, contrary to the EAT’s decision, EU law does not require that the number of proposed dismissals in each of the employer's establishments be added together to determine if the consultation trigger has been met. This is confirmed by the ECJ specifically stating that the Directive must be interpreted as ‘not precluding’ national legislation that lays down an obligation to inform and consult workers in the event of the dismissal, within a period of 90 days, of at least 20 workers from a ‘particular establishment’ of an undertaking, and not where the aggregate number of dismissals across all of the establishments or across some of the establishments of an undertaking over the same period reaches or exceeds the threshold of 20 workers.

The case will now return to the Court of Appeal who will give a final ruling on the impact in the UK, but that may not be the end of the matter. The ECJ observed that the redundancies were effected within two large retail groups carrying out their activities from stores situated in different locations throughout the United Kingdom, employing in most cases fewer than 20 employees, and the ET took the view that the stores to which the employees affected by those dismissals were assigned were separate ‘establishments’. The ECJ confirmed it is for the Court of Appeal to establish whether the stores can be classified as separate ‘establishments’, so from an employers’ perspective the emphasis will be on correctly determining the ‘establishment’ where the redundancies are proposed.

 

Content Note

The aim is to provide summary information and comment on the subject areas covered. In particular, where employment tribunal and appellate court cases are reported, the information does not set out full details of all the facts, the legal arguments presented by the parties and the judgments made in every aspect of the case. Click on the links provided to access full details. If no link is provided contact us for further information. Employment law is subject to constant change either by statute or by interpretation by the courts. While every care has been taken in compiling this information, SM&B cannot be held responsible for any errors or omissions. Specialist legal advice must be taken on any legal issues that may arise before embarking upon any formal course of action.

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