Decision ends long-running uncertainty over collective redundancies
A decision from the European Court of Justice has ended the legal battle over whether employers should collectively consult staff facing redundancy across multiple sites.
Examining two cases, collectively known as the ‘Woolies case’, the ECJ found that collective consultation with employee representatives is only required where 20 or more redundancies are proposed at the same establishment (USDAW and Wilson v WW Realisation 1 Ltd (in liquidation) and Ethel Austin Ltd and Secretary of State for Bis).
When Woolworths, and then Ethel Austin, went into administration and employees were made redundant, people working in stores with fewer than 20 staff were not collectively consulted. However, the two cases brought by the union Usdaw claimed that all staff should have been consulted as the aggregated number of people affected across the businesses was over the threshold of 20 people. Usdaw won their case at an employment appeal tribunal in 2012 and the UK law changed so employees from multiple sites were eligible for collective consultation.
However, today the ECJ has ruled that the UK's original understanding of the 'establishment' wording was right.
The ECJ clarified the definition of ‘establishment’ as the unit where workers made redundant are assigned to carry out their duties, rather than aggregated across the entire business.
Chris Mordue, employment partner at Pinsent Masons law firm, said: “Businesses will be hugely relieved by the ECJ's decision today. This is the end of an arduous legal battle which has caused confusion for UK businesses and could have led to compliance failures and millions of pounds of liabilities for UK employers.
“The ECJ has restored the long-established UK approach that collective consultation with unions or employee representatives is required only where 20 or more redundancies are proposed at the same establishment. Today’s decision will be especially welcomed by multi-site companies such as retailers, who would have been particularly at risk from significant additional costs and burdensome red tape if the duty to consult was confirmed for small scale restructuring across several sites.”
Katja Hall, CBI deputy director-general, said: “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.”
In a statement law firm Charles Russell Speechlys said: “This will clearly result in less collective consultation exercises being triggered, which will allow businesses more flexibility in managing their workforce.”
It added: “This case would still need to return to the Court of Appeal to apply the judgement in the UK. Since the decision appears to allow for the current UK legislation to stand, it is likely that it will be fairly straightforward.”