Advocate General’s opinion delivered on the meaning of “establishment” for collective redundancy consultation.

• The EAT previously ruled that the wording “at one establishment” was incompatible with European law
• The Government appealed the EAT’s decision to the Court of Appeal who in turn have sought the opinion of the ECJ
• The Advocate General has today given their opinion prior to the ECJ ruling

At the start of last year we reported that the Court of Appeal had sought a ruling from the European Court of Justice (“ECJ”) on the meaning of “at one establishment” for the purposes of collective consultation in redundancy situations. The Court of Appeal considered the case in November and is due to provide their ruling shortly. In the interim period, the Advocate General (“AG”) has this morning provided their view on the matter.

Background

As a summary, the EAT previously held that employees of retail chains Woolworths and Ethel Austin, who at the time of their redundancies worked in stores with fewer than 20 employees, were entitled to be consulted collectively in respect of those redundancies. The EAT came to this decision as it found that the words “at one establishment” in English redundancy legislation were incompatible with European law and should be disregarded. This went against previously established law that there were no collective consultation requirements for sites where less than 20 employees “at one establishment” are proposed to be dismissed.

The Government, who carried the financial liabilities for the insolvent companies, appealed the EAT decision to the Court of Appeal who in turn has now sought a ruling from the ECJ.

Summary of Advocate General’s opinion

In what will be seen as welcome news for employers, the AG has this morning confirmed the long held belief that there is no requirement to collectively consult where less than 20 employees “at one establishment” are proposed to be dismissed by reason of redundancy.

It wasn’t all good news for employers however, as the AG sounded a warning that it would be for national Courts to determine what exactly constitutes “one establishment”. Referring to establishments as “a single local employment unit”, the AG attempted to clarify their opinion by providing the following example; “Where an employer operated several stores within a shopping centre, it would not be inconceivable that all those stores should be regarded as forming a single local employment unit.” It is clear therefore, that where employers operate more than one establishment within close vicinity of each other, there is a risk that the separate establishments may be considered together for the purposes of collective redundancy consultation requirements.

We now await the formal ECJ decision on the matter which is expected in the coming months. Whilst the Advocate General’s opinion is not binding on the ECJ, it is very influential and usually followed.

Implications for your business

Today’s opinion, and any future ruling, will only apply to your business if you are proposing on making redundancies where the number of employees totals 20 or more. The position remains that no collective redundancy consultation is required when making less than 20 employees redundant.

Whilst today’s AG opinion does contradict the previous EAT decision on the matter, employers are unfortunately still bound by the EAT decision which says that where 20 or more employees are to be made redundant, and regardless of over how many sites, all employees must be collectively consulted. This position will remain until the ECJ delivers its decision and the same is in turn confirmed by the Court of Appeal.

Potential wider implications of the changes

The use of the term “one establishment” is still relevant for the purposes of deciding whether other collective redundancy consultation obligations are triggered, such as when collective redundancy consultations should start and end. 

What we think you should be doing about the changes now.

The administrative burden of the extra consultation requirements, albeit in what may be a temporary measure until the ECJ and Court of Appeal deliver their judgments, will need to be weighed up against the financial penalties available to employees via a successful Tribunal claim for failure to consult collectively. The compensation currently available is up to 90 days’ pay for each employee affected by a failure to collectively consult, in addition to any likely claim for unfair dismissal and possibly redundancy pay. Clearly if a number of employees bring claims in such circumstances, the cost to your business could be significant.

In our opinion, it would continue to make sense in the interim period to err on the side of caution and implement collective redundancy consultation with all employees who may be affected, regardless of the number of potentially redundant staff on any site.

How can you find out more?

If you would like any further information on the issues raised in this blog, please contact Tim Gofton on 01242 248283 or email tim.gofton@bpe.co.uk

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice