Collective redundancies: meaning of establishment

February 5, 2015

If an employer is proposing to make redundant 20 or more employees at one establishment within a period of 90 days or less, collective consultation is required. Employee representatives must be elected and consultation must take place with those representatives with a view to reaching agreement on ways of avoiding the dismissals, reducing the number of employees to be dismissed and mitigating the consequences of the dismissals. Consultation must begin in good time and at least 30 days (45 days if 100 or more employees are to be dismissed) before the first dismissal takes effect. At the very least this process will add another month’s salary bill to the employer’s costs.

Failure to comply with the collective consultation process can give rise to a protective award of up to 90 days’ actual pay per affected employee.

For employers with multi-site operations, the key question is what is meant by establishment. This is currently the subject of a number of cases before the Court of Justice of the European Union, including one referred by the UK tribunals arising out of the disappearance of Woolworths stores from our high streets (sometimes also referred to as the Ethel Austin case, to which it is joined). The Woolworths case is being fought by USDAW the trade union representing former Woolworths employees who were made redundant but were not included in a collective consultation process. It turns on whether redundancies across the Woolworths business should be aggregated for these purposes, or whether the number being made redundant at individual stores should be looked at separately. In the latter case, no collective consultation would be required unless the 20 employee threshold was reached at each individual store. In the former, potentially huge protective awards are likely.

The Advocate-General, whose opinion is usually, but not always, followed by the CJEU, has today stated that in his view aggregation is incorrect, and that it is the number of redundancies at each individual establishment that is relevant when determining whether collective consultation is required. He leaves it to the UK’s employment tribunals to decide as a question of fact in each case the identity of the establishment. This will not necessarily mean that each individual shop would fall to be considered separately. The facts of each situation will be key. Where there are a number of an employer’s outlets in one town centre, an example might be Pret or Costa, and if staff are shared between the outlets and are under common management, will they be treated as one establishment or several?

This is good news for employers with multi-site businesses, if the CJEU follows the Advocate-General’s opinion in its decision. This is expected later this year.

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