Consulting on collective redundancies? What does the Advocate General’s opinion today mean for employers?

Written on 5 Feb 2015

The Advocate General (“AG”) has today handed down what appears to be a welcome opinion in the “Woolworths” case on the issue of when the obligation to collectively consult on proposed redundancies is triggered in accordance with the European Collective Redundancies Directive. Drawing back from an “all establishments” approach, the Advocate General has stressed that it is the “local employment unit” that is critical when considering the protection afforded by the Directive although he has left the door open for Member States to introduce more favourable provisions. 

What is the issue?

Whilst it is clear that the collective consultation obligation is triggered when an employer proposes 20 or more redundancies within a 90 day period, the live issue is whether these 20 or more proposed redundancies relate to any proposals across all of an employer’s establishments or relate to proposals at just “one” establishment. The UK statute states the latter position applies i.e. an “at one establishment” approach. However, the Employment Appeal Tribunal (“EAT”) in Woolworths disagreed holding that the Directive required an employer to look at the numbers of proposed redundancies across all its “establishments”. The Court of Appeal (“CA”) has referred the issue to the Court of European Justice (“ECJ”) to determine.

The penalty for getting the collective consultation rules wrong can be severe. Not only can it be a cause of breakdown in employee relations, an Employment Tribunal can award up to 90 days’ actual pay per affected employee.

In Woolworths there was a failure to comply with the collective consultation rules. Whilst it was relatively clear cut that employees in larger stores with 20 or more employees would therefore be entitled to a protective award, USDAW (the Union of Shop, Distributive and Allied Workers) could see no reason why employees in the smaller stores should also not be entitled to such an award on the basis that there were 20 or more redundancies proposed across all of Woolworths’ establishments for the purposes of the collective consultation rules.  The numbers at the individual branches were not relevant.  The EAT agreed meaning that, in fact, these 3233 employees were potentially eligible for a protective award running into millions of pounds.

What has the AG said? 

The AG has held that:

  • Although the Directive is intended to provide minimum protection with regard to information and consultation of workers, it does not contemplate full protection for all, even where the number of dismissals across a business exceeds the thresholds.
  • The reference to “establishments” in the Directive should not be read to mean the whole of an undertaking. If that had been intended, different terminology would have been used. 
  • The key question is what is the establishment in question. Based on ECJ case law on the meaning of establishment, this is essentially “the unit to which the workers made redundant are assigned to carry out their duties”. This case law applies to the Directive provisions the UK has sought to implement. What the unit is in a particular case will be a question for the national courts. 

The AG was at pains to point out that the Directive is intended to protect against the socio-economic effects which collective redundancies may have in given local context and social environment – the local employment unit. As he stated “it is precisely the local community that may wither and fade away without protection from collective redundancies”. Dismissals which are below the Directive thresholds “do not pose the same threat to the survival of local communities”.

However, the AG did state that Member States could introduce more favourable measures, including aggregating the number of proposed dismissals across a number of establishments, provided it was more favourable in all collective dismissal scenarios. However, this would be a more favourable position than that intended by the Directive.

What does this mean for employers?

This is an unexpected but welcome turn of events for employers. It makes business sense for multi-site employers to be able to, in the main, focus their collective consultation efforts on proposals where a large number of redundancies will have a particular impact in a local community rather than smaller pockets of redundancies which are not related in anyway. The opinion also potentially brings some good news for administrators, arguably left in many cases in an increasingly difficult position legally and practically if the at all establishments approach is adopted. 

However, unfortunately there is no obligation on the ECJ to agree with the AG – so we are still in a “wait and see” situation. 

In the meantime, employers are still stuck with the EAT’s “at all establishments” approach in Woolworths. It may be that some employers will now take a more robust view in light of the AG’s opinion today but this will need to considered legally and commercially on a case by case basis.

Employers would still therefore be sensible to ensure that:

  • There are processes in place allowing an overall awareness of any proposals across business locations but bearing in mind internal issues of confidentiality etc.;
  • Where it is considered that collective obligations kick in consideration is given as to how employees will be represented – will a standing body provide adequate representation or will it be appropriate to elect representatives.
  • They are aware of the inconsistencies between the EAT ruling and other legal provisions governing the collective consultation process:
    • The minimum time period for which collective consultation must take place of 30 or 45 days still requires an employer to look on an “at one establishment” basis.
    • The same is true of the form HR1 which must be submitted to the Secretary of State for business where 20 or more redundancies are proposed “at one establishment”. In practice though, employers would still be sensible to submit an HR1 where the 20 or more proposed redundancies are across a number of establishments (even if the form is rejected) since it must also be provided to the appropriate representatives at the start of the collective consultation process.

We now await the decision of the ECJ which in turn will then need to be considered by the CA. Touchwood employers will then have clarity on the trigger for collective consultation obligations. 

For further advice on this issue please do not hesitate to get in touch with your usual OC Contact.