The European Court of Justice (ECJ) has given its decision in the long running Woolworth’s case on the meaning of “establishment” for the purposes of determining when the obligation to consult on collective redundancies is triggered. They key issue in this case was whether the number of employees dismissed across an employer’s various establishments should be added together to decide if the threshold for collective consultation kicks in.
Collective consultation obligations kick in where an employer proposes to make 20 or more employees redundant within a 90 day period at one ‘establishment’. The employer will be required to notify the Government Department for Business, Innovation and Skills (BIS) and to consult with appropriate representatives of the employees for a period of at least 30 or 45 days (depending on employee numbers). Failure to do so can result in a ‘Protective Award’ being made of up to 90 days’ gross pay per affected employee. If an employer proposes to make less than 20 employees redundant, a proper consultation process must still be followed but there are no specific timescales and there is no threat of a ‘Protective Award’. The definition of ‘establishment’ can therefore be very important to employers.
The ECJ has now held that “establishment” for collective consultation purposes refers to an individual workplace and not to the employer’s business as a whole. Therefore Woolworths were right to count each store as a separate establishment and did not need to engage in collective consultation with staff who worked in a store with a headcount of less than 20 employees. The ECJ has referred the case back to the Court of Appeal to decide if each store of Woolworths was a separate establishment.
What it means
This decision will be particularly welcome news for large employers operating across many establishments. It means that they can go back to the position of consultation obligations being triggered on an establishment by establishment bases. This also avoids the administrative burden placed on employers in having to track all redundancies proposed across the whole business to establish whether the collective consultations obligations has been triggered.
It is worth mentioning that although the place to which the employees are assigned to carry out their duties will often be obvious, this will not always be the case. For example, if an employer operates several stores in one shopping centre it would not be inconceivable that all of those stores should be regarding as one establishment.
If you have any questions about your consultation obligations in a redundancy process, please contact us for more information.