Collective redundancy consultation - Advocate General's opinion on meaning of 'establishment'

The Advocate General has given his opinion on the meaning of the term ‘establishment’ for the purposes of determining when the collective consultation regime applies.

The European Collective Redundancies Directive sets out minimum requirements for consultation when large scale redundancies are contemplated. This Directive has been implemented in the UK by means of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). Under TULRCA, employers must collectively consult where they propose to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. The penalty for failure to consult under TULRCA is up to 90 days’ actual pay per employee.

Until 2013, the common practice in the UK was to carry out collective consultation only if 20 or more redundancies were proposed at the establishment where the relevant employees were working. However in 2013, in the Woolworths case, the Employment Appeal Tribunal (EAT) held that the words ‘at one establishment’ in TULRCA should be disregarded and that all redundancies across the whole of the employer’s workforce, no matter where their location, should be aggregated. The effect of this was that employers with more than one location would have to collectively consult if in total they were proposing 20 or more redundancies in any 90 days period even if no single office or location had more than 20 proposed redundancies by itself.

This decision was appealed to the Court of Appeal and subsequently referred to the ECJ.

The Advocate General has now given his opinion that ‘establishment’ in the Directive means the local employment unit to which the redundant workers are assigned to carry out their duties. It does not require the employer to aggregate redundancies across their business. The Advocate General noted that the intention of the Directive is to address the impact of redundancies in a ‘given local context and social environment’. On this basis, the focus is on the local employment unit rather than the business as a whole.

The Advocate General said that it is for each national court to determine how the local employment unit should be defined. He gave an example of an employer who operates several stores in one shopping centre. In the Advocate General's view it would not be inconceivable that all of those stores taken together should be regarded as forming a single local employment unit.

Although the Advocate General’s opinion is encouraging news for employers, the ECJ is not obliged to follow the Advocate General’s opinion when it considers this issue formally later this year. In the meantime, the EAT decision remains good law and therefore employers may wish to take a cautious approach to any proposed redundancies and aggregate numbers across their different offices when deciding if the collective consultation requirements are triggered.

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