What is an establishment for the purposes of collective redundancy consultation?

Posted on: June 5th, 2015

In our Breakfast Briefing in March, we gave an update on the long running “Woolworths” case as the Advocate General’s view had just emerged.  We thought that the Advocate General’s sensible approach would be followed by the European Courts of Justice and this has very recently been confirmed.

To recap then, the key question was what is meant by establishment for the purposes of collective redundancy consultation?  The issue is whether you should treat each business unit as a separate establishment or whether you need to treat the whole business as one establishment and add up the total number of redundancies proposed across the organisation.  The Advocate General’s view was that it is up to individual member states to decide what “establishment” means and that you do not need to add up all of the employees dismissed across various establishments.

The European Court of Justice has confirmed this approach and said that “establishment” means the business unit where the employee works and that where a business has more than one “establishment” there is no need to add up all of the dismissals at all of the establishments.  It also gave some further useful guidance on interpreting what “establishment” means and said that for it to be a separate business unit there is no need for economic or administrative autonomy or for a management which can independently put in place collective redundancies.  This is a return to normality in terms of collective consultation in redundancies in the UK, going back to the position before the Woolworths case.  Had the case gone the other way employers would have been faced with the burden of having to collectively consult with employees where more than 20 dismissals were proposed spanning the organisation, causing practical difficulties for larger employers and possible financial risks of employees bringing employment tribunal claims.

A sigh of relief then for large multi-site employers and whilst this is a definitive ruling from the European Courts of Justice, the Woolworths saga is not yet over.  The case will now go back to the Court of Appeal for it to decide that in light of the European Court of Justice’s judgment it was the right approach to take given the facts and circumstances of the Woolworth’s case. So the Court of Appeal will apply the “establishment” test defined by the European Courts to determine whether each of the Woolworths stores was a separate establishment.  In light of the Advocate General’s Opinion and the European Courts of Justice’s ruling, it’s likely that the Court of Appeal will reach the same conclusion; however, we will of course update you in due course.