UK: Unions unhappy at European court ruling on collective redundancy case

Trade unions in the UK have expressed disappointment at a ruling clarifying the EU directive on collective redundancies. However, employers’ groups welcomed the decision by the  European Court of Justice (ECJ), which confirms that, under EU law, redundancy consultation obligations can be triggered on an establishment-by-establishment basis, not across an entire undertaking.

The decision, on 30 April 2015, marked the latest stage of a long-running legal case concerning the handling of redundancies following the closure of two major retail chains. It overturned a controversial ruling by the Employment Appeal Tribunal in the UK.

Background

The case began after the closure of UK retail chain Woolworths, which went into administration in November 2008 and subsequently into liquidation. All its employees lost their jobs. Two trade unions, the Union of Shop, Distributive and Allied Workers (Usdaw), and Unite the union, applied for compensation at an employment tribunal on behalf of their members. They argued that staff were entitled to a ‘protective award’ because the administrators had failed in their statutory duty to consult with union representatives before the redundancies. UK law requires employers who propose 20 or more redundancies at one establishment to consult trade union or other employee representatives within a 90-day period about ways of avoiding, reducing or mitigating the consequences of the redundancies.

The tribunal upheld the unions’ claim and made protective awards for more than 24,000 former Woolworths’ employees. However, about 3,000 former employees were denied compensation on the grounds that they worked in smaller branches where fewer than 20 redundancies were made. Usdaw strongly criticised this decision and appealed against the tribunal’s decision.

In May 2013, in a judgement covering both the Woolworths’ case and a similar one relating to clothing chain Ethel Austin, the Employment Appeal Tribunal (EAT) reversed the original ruling on this point. Noting that article 1 of EU Directive 98/59/EC on collective redundancies refers to ‘the establishments in question’ in the plural, the EAT decided that UK law needed reinterpreting to conform with EU law and ensure that the duty to consult over redundancies is triggered when there are 20 or more employees affected across the business as a whole, not just at one establishment.

The UK Department for Business, Innovation and Skills, which viewed the EAT’s ruling as ‘unwelcome’, sought, and was granted, leave to appeal. Having not attended the EAT hearing, the government is required to pay Usdaw’s full costs for the appeal.

Main developments

Reference to ECJ for preliminary ruling

In January 2014, the Court of Appeal of England and Wales (Civil Division), which is hearing the appeal, decided to refer certain issues to the European Court of Justice (ECJ) for a preliminary ruling. It asked whether the phrase ‘at least 20’ in the directive refers to the number of dismissals across all of the employer's establishments, or only the number of dismissals in each individual establishment. It also asked the ECJ to clarify the meaning of ‘establishment’ – in particular whether this should be construed to mean the whole of the relevant retail business as being a single economic business unit, or the individual store where the employees concerned work.

Opinion of the Advocate General

The opinion of the Advocate General, Nils Wahl, on the issues raised by this and other related cases was issued in February 2015. He supported the view put forward by the UK government and the European Commission that the term ‘establishment’ denotes the unit to which workers are assigned to carry out their duties. He also stated that the directive does not require – nor does it preclude – aggregating the number of dismissals in all the employer’s establishments for the purposes of verifying whether the thresholds set by the directive are met.

ECJ judgment

In its judgment, issued on 30 April 2015, the ECJ took a similar approach. It stated that, where an undertaking comprises several entities, it is the entity to which the workers made redundant were assigned to carry out their duties that constitutes an ‘establishment’. It is for the UK courts to determine whether former Woolworths stores should be classified as separate ‘establishments’. The ECJ also found that the interpretation of the words ‘at least 20’ requires that ‘account be taken of the dismissals effected in each establishment considered separately’.

The ECJ ruled that:

[the directive] must be interpreted as not precluding national legislation that lays down an obligation to inform and consult workers in the event of the dismissal, within a period of 90 days, of at least 20 workers from a particular establishment of an undertaking, and not where the aggregate number of dismissals across all of the establishments or across some of the establishments of an undertaking over the same period reaches or exceeds the threshold of 20 workers.

Reaction to the ruling

John Hannett, General Secretary of Usdaw, conceded that the ECJ's ruling ‘marks the end of the road for our members from Woolworths and Ethel Austin seeking justice and they are heartbroken by today’s verdict’. He said:

Our case is morally and logically robust, so today’s verdict is a kick in the teeth. It is unfair and makes no sense that workers in stores of less than 20 employees were denied compensation, whereas their colleagues in larger stores did qualify for the award. These were mass redundancy situations where one central decision was made to close the whole company down, with no individual analysis of the viability of each store on a case-by-case basis.

However, employer groups responded positively to the ruling. On behalf of the Confederation of British Industry (CBI), Deputy Director-General Katja Hall commented:

This is a victory for common sense – and will be welcomed by firms right across the UK. The case has dragged on for nearly two years – and the uncertainty caused has created additional and costly burdens for British businesses. This decision has given certainty to the law and restored consultation to genuine cases of collective redundancy. The Government was right to heed our advice and appeal the original judgement.

Commentary

The final outcome of the appeal will depend on the decision of the Court of Appeal but it is clear that the approach taken by the ECJ effectively overturns the EAT’s interpretation of the EU directive. Trade unions and other groups campaigning for the improvement of workers’ rights will now turn their attention to seeking legislative reforms to prevent similar injustices from arising in the future, but are unlikely to find a favourable response from the recently elected Conservative government.

 

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