Overview
In Depth
Background
UK legislation provides that, when a UK employer proposes to make redundant 20 or more employees at one establishment within a period of 90 days or less, the employer is required to collectively consult representatives of those affected, prior to implementing that proposal. Failure to do so can lead to the employer being required to pay up to 90 days’ pay to each affected employee (a Protective Award).
In 2013, when considering the lawfulness of the collective redundancy process carried out by Woolworths in the throes of its closure, the UK Employment Appeal Tribunal caused havoc by deciding that the words “at one establishment” should be deleted from the legislation.
The deletion meant that, in order to avoid liability for a Protective Award, an employer proposing make 20 or more redundancies, anywhere in their UK business, within the relevant timeframe, needed to collectively consult about those proposals, no matter how geographically disparate and wholly unconnected the proposed dismissals might be.
What Has happened?
The Court of Appeal, thinking that this really could not be right, asked the European Court for a preliminary ruling on the issue.
The way the European system works is that an Advocate General (AG) first considers the question and then delivers his opinion. The European Court then uses the AG’s opinion to assist it in coming up with its Judgment. The European Court can disagree with the AG, but it usually follows the AG’s recommendation.
In this case, the AG has decided that, in his opinion, the term “establishment” in UK legislation means the local employment unit to which the relevant workers are assigned to carry out their duties.
It is for each country to decide what the local employment unit is, but an establishment may consist of a distinct entity that has a certain degree of permanence and stability, is assigned to perform one or more given tasks, and has a workforce, the technical means and a certain organisational structure allowing for the accomplishment of those tasks.
What Does This Mean For UK employers?
While the European Court will have the final say on the issue, we think it’s almost certain it will agree with the AG. If we’re right, then redundancy collective consultation as we have always known it will return.
This means that the obligation to collectively consult will only be triggered if an employer proposes to make redundant 20 or more employees at one establishment, within a period of 90 days or less.
Whether a unit qualifies as an establishment will be determined by the tests with which we have all become familiar over the years.