Good news day for employers and the UK Government as establishment criterion looks set to return in collective redundancy

5 minute read
05 February 2015

The Advocate General (AG) considers that the UK can legitimately limit the threshold for redundancies necessitating collective consultation to those where 20 or more redundancies are proposed at a 'single establishment'.

If followed, this will mean that the law returns to its pre-Woolworths litigation position; employers must look at the 'establishment' question to decide whether the duty to collectively consult arises. It will be back to the future to argue, once more, about independence of management in a local context. There will be no automatic need for collective consultation where 20 or more redundancies are proposed across the business.

We must wait and see if the Court of Justice of the European Union (CJEU) will follow the AG's opinion but, for now, employers and the UK Government will be breathing a sigh of relief.

The case

The CJEU was asked to consider whether the UK had correctly transposed the EU's Collective Redundancies Directive. Alongside references from the Spanish and Northern Ireland courts the AG has roundly rejected the suggestion that it hadn't.

The issue arises from section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 which provides that:

"where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals ... appropriate representatives of ... the employees ..."

This comes from Article 1(1)(a) of the EU's Collective Redundancies Directive. This allows national governments to define the threshold for consultation as either -

  1. where the number of redundancies is either, over a period of 30 days:
    • at least 10 in establishments normally employing more than 20 and less than 100 workers,
    • at least 10% of the number of workers in establishments normally employing at least 100 but less than 300 workers,
    • at least 30 in establishments normally employing 300 workers or more; OR
  2. where the number of redundancies is, over a period of 90 days, at least 20, whatever the number of workers normally employed in the establishments in question.

The Employment Appeal Tribunal (EAT) decided that USDAW was correct when it said that the UK had cherry picked from the two alternatives by choosing option B but limiting it to numbers at a single establishment as found in option A. Going even further, the EAT decided that the words "at one establishment" should be immediately disregarded from s188.

After a late intervention from the UK Government, which found itself facing a hefty bill to pay-out protective awards incurred by insolvent companies, the CJEU was asked to consider various issues. Most notably, whether the UK's approach to the legislation was valid.

Thankfully, for employers, the AG's view is that the UK had NOT failed to give proper effect to the Directive. Of interest among the reasoning the AG explained:

  • the fact that some language versions of the Directive (including the English version) uses 'establishment' (singular) in approach A, but 'establishments' (plural) in approach B, "is of no importance". It is "simply a generic reference".
  • the Directive does not contemplate full protection for all as a starting point.
  • establishment has already been defined by the European Court as 'the unit to which the workers made redundant are assigned to carry out their duties', in other words, the AG says, "the local employment unit".
  • the legislation has a social protection aim. It is precisely the local community that may wither and fade away without protection from collective redundancies.
  • the Directive uses the term 'establishment' and not the term 'undertaking'. They are not one and the same thing.
  • in the context of group companies, thresholds are not calculated by reference to an entire group. The obligations are only imposed on an employing subsidiary.

There will now be a further wait to see whether the CJEU will adopt the AG's opinion. For how long we can't say but we're one step closer after today's decision.

What should employers do now?

Employers should continue to tread with caution while we await the judgment of the full court and consider waiting to embark on a redundancy exercise which involves 20+ employees across the business.

If the business can't wait, the cautious approach still calls for collective consultation where 20 or more redundancies are proposed across the business. That said, while employers can't yet be sure, the risk is lower than it has been up until this point and, for employers in the private sector in particular, this could now be something to take a view on.

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