Thousands of shop workers were made redundant when Woolworths plc and Ethel Austin went into liquidation and the stores where they worked closed down. An employer is required to collectively consult where it proposes 20 or more redundancy dismissals at one establishment within a 90-day period, but the liquidator had conducted only a very cursory process.

An employment tribunal agreed with the union representatives that there had been a failure to collectively inform and consult, but only at stores with 20 or more employees. The tribunal considered that each individual store was an establishment, and so the obligation to collectively consult had not been triggered at stores with less than 20 employees. The union appealed.

The EAT allowed the appeal, holding that section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 was too restrictive and did not comply with the Collective Redundancies Directive (98/59/EC) (the Directive) (see box “Legislative discrepancy”). It said that the words “at one establishment” should be deleted so that the obligation to collectively consult is triggered as soon as 20 employees are to be made redundant within 90 days, regardless of where they worked.

The Secretary of State appealed to the Court of Appeal, which, among other things, asked the ECJ to consider two key questions:

The AG said that, for legal certainty, establishment must mean the same whichever definition of collective redundancy is chosen under Article 1(1)(a) of the Directive. The AG referred to previous cases addressing the Article 1(1)(a)(i) option, which had interpreted establishment as meaning the unit to which the workers made redundant were assigned to carry out their duties (Rockfon A/S V Specialarbejderforbundet I Danmark, acting for Nielse & Ors C-449/93, www.practicallaw.com/3-100-0253; Athinaiki Chartopoiia AE v Panagiotidis and others C-270/05). He saw no good reason to depart from this.

In those cases, the ECJ had expressly rejected the argument that establishment meant an undertaking or legal entity, or that it was relevant to consider how the entity was structured internally. The focus of the ECJ’s analysis was on the local employment unit, and a recognition that the Directive was seeking to protect the socio-economic effects of redundancies in a local context.

The AG said that the Directive aimed to provide minimum protection with regard to information and consultation where there are collective redundancies, but this must be balanced with the other aim of harmonising the costs to undertakings in the EU of offering that protection. He pointed out that the Directive has never sought to protect all workers; for example, dismissals that fall outside the relevant timeframe would not be covered.

Therefore, in his view, there is no requirement to aggregate the number of dismissals across all establishments in a legal entity. It would be for the national court or tribunal to decide whether a local employment unit was an establishment, and an individual store may well be a separate establishment. However, that would be a factual analysis. The AG gave the example of an employer operating several stores in one shopping centre, which could, depending on the facts, be a single local employment unit. He also said that EU member states can, if they wish, increase the minimum level of protection to employees under the Directive, provided that the approach they take is more favourable to all of the workers being made redundant.

The AG’s opinion is not binding, although it is frequently persuasive, and it remains to be seen whether the ECJ will follow it. If the ECJ does follow the opinion (as, in our view, it should) this will essentially reverse the position in the UK, and shift the focus back to the question of what the relevant establishment is, based on the facts of the case in hand. In deciding that question, employment tribunals will be guided by the principles in Rockfon and Athinaiki Chartopoiia, and the EAT’s decisions in Renfrewshire Council v Educational Institute of Scotland and MSF v Refuge Assurance Plc & Anor (UKEATS/0018/12, www.practicallaw.com/1-522-6079; [2002] IRLR 324).

Employers that, since the EAT decision in Woolworths, have begun to aggregate all redundancies across the company when deciding if they need to consult would be prudent to continue that approach, at least until we have the ECJ decision, and potentially until the issue is reconsidered by the English courts. Many employers have not changed their practice. For them, until we have a definitive decision, the risk of non-compliance remains, but there is at least some comfort that clarity is nigh.