"Establishment test" for Collective Consultation Re-established

Article

20 July, 2015

A recent decision by the European Court of Justice ("ECJ") in the case of Woolworths will no doubt be welcomed by businesses that operate from more than one site. The decision means that in the case of businesses with multiple stores or offices, like Woolworths, in a redundancy situation a collective consultation need only be carried out at individual sites that employ 20 or more people. The argument that the "establishment" for the purposes of collective consultation should mean the entire company was rejected.

The background to the case is as follows. When Woolworths became insolvent and went into administration, thousands of employees across a number of stores within the UK were dismissed on grounds of redundancy. When approaching collective consultation Woolworths regarded each outlet as a separate 'establishment', which meant that they did not need to engage in collective consultation with staff who worked at stores with fewer than 20 employees.

Claims were brought against Woolworths by the union USDAW seeking protective awards for those employees on the basis that all the stores in the UK should be regarded as one "establishment" and that Woolworths should have engaged in collective consultation with them all. The Employment Tribunal agreed with Woolworths and held that each store should be regarded as a separate 'establishment'. To the consternation of many, the Appeal Tribunal then reversed this decision and held that, in line with EU principles, the "establishment" should be counted as one, and therefore all employees should have been consulted on a collective basis. This decision sent ripples across the world of employment law as it had the potential to place highly damaging additional costs and burdens on thousands of employers.

Unsurprisingly, the case went to the Court of Appeal, who referred it on to the ECJ requesting clarification on the meaning of the term 'establishment'. In a welcomejudgment for many businesses the ECJ has now ruled that 'establishment' means "the entity to which the workers made redundant are assigned to carry out their duties". For Woolworths this meant that 'establishment' referred to an individual store and not Woolworths as a whole. Now the case has been formally referred back to the Court of Appeal its decision should be a formality and the 2013 decision by the Employment Appeal Tribunal is likely to be reversed though that decision is awaited. This should lead to extra flexibility and produce major savings in time and resources.

For further information please contact Jonathan Holden by email or call 01772 220396.

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