legal focus 27
The establishment strikes back
Over the best part of the past two years, employment lawyers and HR professionals the length and breadth of the country have been debating the principle of 'establishment' in the context of collective redundancies, writes Alistair McArthur, partner and head of employment at Herrington & Carmichael
This is all as a result of the case of USDAW v Ethel Austin Ltd. This case involved employees of a number of leading retailers being made redundant. This included the closures of both Woolworths and Ethel Austin stores. On April 30, 2015, the European Court of Justice (ECJ) gave their decision on this long-running saga.
The obligation to collectively consult comes from the European Collective Redundancies Directive and is set out in UK law as section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A). This states: “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 all the persons who are appropriate representatives of any of the employees…”.
When Woolworths and Ethel Austin went into administration they proposed to make many redundancies across all of their stores. As was common practice, at the time, each store was treated as a separate “establishment” for the purposes of the consultation. Therefore only those stores with 20 or more employees had to engage in a process of collective consultation. Where there were less than 20 employees at any one store, only individual redundancy consultation was undertaken.
As a consequence, some 3,233 employees of Woolworths pursued claims, with the assistance of their trade union, for the failure to inform and consult properly in an attempt to recover a protective award of up to 90 days pay each. They argued that the word “establishment” should be disregarded for the purposes of TULR(C)A.
At the initial employment tribunal hearing, it was held that each store was a separate “establishment” and therefore the obligation to collectively consult was not triggered across the whole company. However, USDAW, on behalf of its members, appealed to the Employment Appeals Tribunal (EAT).
At the EAT, USDAW, on behalf of its members, were unopposed and were able to successfully argue that the words “at one establishment” should effectively be removed from the Section 188(1). The effect of this being the number of redundancies was assessed on a company or undertaking wide basis rather than as separate stores. As a result of this decision, employers had to reassess their approach to redundancies and recalculate the number of affected employees at a corporate rather than local level.
The EAT’s decision was appealed and the Court of Appeal referred the matter to the ECJ to clarify what is meant by “establishment”.
On the April 30, 2015, and nearly two years after the EAT’s decision, the ECJ published its decision. The ECJ decided that “establishment” means the unit to which the worker is assigned and not the whole corporate entity.
THE BUSINESS MAGAZINE – THAMES VALLEY – JUNE 2015
www.businessmag.co.uk
So, using the example of Woolworths, a duty to inform and consult on redundancies would only arise at those branches where there were 20 or more employees being made redundant. This decision being consistent with the original employment tribunal’s decision.
However, as the advocate general highlighted, there remains some uncertainty regarding the “unit to which the workers are assigned to carry out their duties”. Whilst, it many cases it will be obvious as to which unit a worker carries out their duties, there could be instances where several stores operated in one location and could be treated as forming one single employment unit. The ECJ did not clarify this point. Therefore, despite the ECJ’s decision employers should still carefully consider what area to treat as the “establishment” when they are considering their collective consultation obligations.
Ultimately the ECJ’s decision favours employers. Employers will now be able to calculate the number of employees for the purpose of collective consultation on a local unit level. Therefore, it is likely the burden of collective consultation will be triggered less often. This case serves, however, as a reminder that failure to properly consult on redundancies can be extremely costly. Employers should ensure that any consultation procedure is properly executed not just to avoid claims from employees but also to maintain the morale of continuing employees and to uphold the employer’s reputation.
If you have any questions relating to the issues considered in this article, contact me, details below.
Details: Alistair McArthur
alistair.mcarthur@
herrington-carmichael.com 0118-9774045
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56