Defining 'establishment'

In the latest stage of the Woolworths redundancy case, the Advocate General has suggested a return to a previous definition of 'Establishment'. Allison Cook considers the implications. 

There has been a new twist in the long running case of USDAW and another v WW Realisation 1 Ltd (in liquidation) and others, better known as the Woolworths case. The case is now being considered by the European courts, and the indication is that there will be a retreat from the previous "employee friendly" decision taken by the Employment Appeal Tribunal in the UK.  

Background

Thousands of workers at Woolworths and Ethel Austin were made redundant as a result of the closure of those stores between 2008 and 2010. On behalf of many of the redundant employees, USDAW, the retail and shop workers union, submitted an employment tribunal claim alleging that the employees hadn't been properly consulted with before their redundancy.

The law says that an employer is required to collectively consult where it proposes 20 or more redundancy dismissals at one establishment within a 90-day period. Woolworths and Ethel Austin were in liquidation, and the liquidator tasked with dissolving the companies did not undertake a significant amount of consultation with the employees who lost their jobs at the stores.

The employment tribunal agreed with the union - there had been a failure to collectively inform and consult, but only at stores with 20 or more employees. As each particular store was an establishment in its own right, the obligation to collectively consult had not been triggered at those stores which employed under 20 employees. This decision was consistent with the prevailing view of what was meant by the word "establishment" for the purposes of collective redundancy consultation. USDAW, acting for the employees, appealed. 

The decision - domestic law

In July 2013, the Employment Appeal Tribunal found in the union – and the employees' – favour, holding that the words "at one establishment" were incompatible with the European Collective Consultation Directive ("the Directive"), the legislation that the UK Government was required to implement to protect employees in multiple redundancy situations. The Judge went further, saying that the words "at one establishment" should be disregarded from the legislation.

USDAW subsequently claimed that this decision would mean the Government would have to pay a further £5m in compensation for the dismissed Woolworths and Ethel Austin employees. Not only this, but the decision caused a great deal of concern for large companies, public services and local authorities across the UK. The decision at the Employment Appeal Tribunal meant that, where an organisation intends to make 20 or more of its employees redundant within a 90-day period – regardless of whether those employees are based at the same location or not, the obligation to consult collectively – usually with unions – would be triggered.

The view at European level

The case was appealed by the Secretary of State and the Court of Appeal referred it on to the European Court of Justice for a decision.

The Attorney General has now issued an opinion to suggest that the European Court of Justice is likely to return the law to how it was previously – so more in line with the stance taken at the Employment Tribunal level. The Attorney General has said that in his opinion, there is no specific requirement in the directive for employers to combine the number of dismissals across all establishments that are in a legal entity. The Attorney General advised that what will amount to an establishment would be a question of fact for the national courts to consider, and it may be that an individual store could be a separate establishment for collective consultation purposes.

This would mean that employers would not have an automatic need for collective consultation where 20 or more redundancies are proposed across the business nationwide, but would be able to argue that different locations were a different establishment for collective consultation purposes, therefore not triggering the collective consultation obligations.

For local authorities and public bodies more generally, it is possible that the Directive does not apply meaning that the requirement to consult on a collective basis is not required for public sector bodies. Article 1 states:

2 This Directive shall not apply to:

"workers employed by public administrative bodies or by administrative bodies or by establishments governed by public law (or, in Member States where this concept is unknown, by equivalent bodies)."

Whilst this principle remains untested, it is highly likely that local authorities will have arrangements in place which govern how consultation should be carried out where a redundancy situation is identified. As such, public sector bodies will be complying with the provisions contained in s. 188. 

The Attorney General's opinion is not binding and we await the judgment of the full court, which is likely to come through later in the year. This means that, for the time being at least, employers who are planning a redundancy process should consider the impact of this opinion carefully. Until the final decision is made by the European Court of Justice, caution will still be required when considering when the obligation to collectively consult will be triggered.

Allison Cook is a Senior Associate at Veale Wasbrough Vizards. She can be contacted on 0117 314 5466 or This email address is being protected from spambots. You need JavaScript enabled to view it..