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End of the road for ex-Woolies staff

Nick Thorpe
Today marked the end of the road for the ex-Woolies and ex-Ethel Austin staff who were seeking to argue that they were entitled to protective awards under UK collective redundancy legislation, Today marked the end of the road for the ex-Woolies and ex-Ethel Austin staff who were seeking to argue that they were entitled to protective awards under UK collective redundancy legislation, notwithstanding that they were employed in stores at which fewer than 20 employees worked.

As many of you will know (particularly if you have been following this case), the consultation obligation for collective redundancy purposes arises only where it is proposed that 20 or more employees may be dismissed as redundant at "one establishment" within a 90 day period.

But what is meant by "one establishment"?

Following a long line of case law, Liverpool and Central London Employment Tribunals had concluded that individual stores were discrete "establishments", meaning that there was no duty on the administrators to consult on redundancies at stores employing fewer than 20 employees when the two retail groups went into administration and the stores were closed. Protective awards were therefore only made to staff employed at larger sites. But this decision (and almost 20 years of case law on collective redundancy) was turned on its head on appeal.

The Employment Appeal Tribunal (EAT) held (to many people's surprise) that the words "at one establishment" under UK legislation failed properly to implement the EU Collective Redundancy Directive and that those words should be deleted to achieve a compatible interpretation.

The effect of the deletion of those words meant that the redundancies across the whole of retail business operated by Woolworths and Ethel Austin (including all the stores) should have been aggregated and that the staff employed at the smaller stores were entitled to protective awards. This not only left the tax payer to pick up a significant bill (running into the several millions of pounds), but it also left multi-site employers with significant uncertainty as to how to approach future redundancy exercises.

Following a reference by the Court of Appeal, the European Court of Justice (ECJ) has today confirmed that the EAT was wrong and that UK legislation was not incompatible with the Directive. The Directive does not require all "establishments" to be aggregated for the purposes of the 20-employee threshold. Rather, the Directive requires account be taken of redundancies effected in each establishment to be considered separately.

As for the meaning of "establishment", the ECJ made reference to its earlier judgment in a Danish case in which it had confirmed that the "establishment" is the unit to which the employees who are made redundant are assigned and that unit may not necessarily be endowed with a management that can independently effect collective redundancies.

Further, in its judgment today, the ECJ reminds us that an "establishment" may consist of a distinct entity within an undertaking "having a certain degree of permanence and stability, which is assigned to perform one or more tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks".

So what does this mean for retailers?

The ECJ observed that since the dismissals were effected within two large retail groups carrying out their activities from stores situated in different locations, the Employment Tribunals took the view that the stores to which the employees affected by those dismissals were assigned were separate "establishments".

While the ECJ has left it for the Court of Appeal to determine whether this was a correct interpretation, the judgment clearly suggests that a store-based approach was a permissible approach for the Tribunal to take. But these things are facts dependent, and while it would appear that we have gone full circle and have returned to a store-based approach, care should always be taken in how you approach the question of "establishment".

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