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'Establishment' means a local employment unit, says the ECJ

The European Court of Justice (ECJ) has given its judgement in USDAW v WW Realisation 1 Ltd (in liquidation) and Ethel Austin Ltd (also known as the 'Woolworths' case). It has held that 'establishment' refers to an individual workplace for the purposes of collective redundancy legislation and not the employer's business as a whole.

Under collective redundancy legislation, an employer's obligation to inform and collectively consult is triggered where that employer is proposing to dismiss as redundant 20 or more employees at one establishment within a 90 day period. 

Background

In 2013, a problem arose following the collapse of Woolworths and Ethel Austin when the Employment Appeals Tribunal ruled that there was an obligation to collectively consult if there were 20 or more redundancies proposed across the whole business.

This represented a significant shift in the law. The result was that multi-site employers were required to collectively consult whenever 20 or more redundancies were proposed to be made in a 90-day period across their entire business. Large businesses faced the difficult task of keeping track of all redundancies proposed across all sites, so that they would know when the obligation to collectively consult arose.

In 2014 the government appealed against the Woolworths decision and the Court of Appeal referred the case to Europe.  

What it means for employers

The ECJ's decision means that an employer will only need to collectively consult where it is proposing to dismiss as redundant 20 or more employees at the same establishment. The ECJ confirmed that an establishment for these purposes is the local unit or entity to which the redundant workers are assigned to carry out their duties. It is not essential for the establishment to have its own management capable of effecting the redundancies. As a result, employers will not be required to aggregate all of the redundancies across its business to determine whether or not the threshold has been reached.  

Although the decision will now be referred back to the Court of Appeal, it is expected that it will confirm that Woolworths was correct to count each of its stores as separate establishments, and not engage in collective consultation with staff who worked in a store with a headcount of less than 20.

For more on the decision, click here.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2015. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.
  
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