For most of the population, the mention of Woolworths conjures up memories of halcyon days gone by, of meandering down a bustling high street to one of the UK’s most recognised stores, perhaps being dragged by children salivating over the prospect of a trip to the pick n’ mix stand.
Sadly, for employment lawyers and HR professionals, the mention of Woollies now generates a deep groan and sense of impending doom. Yes, I’m talking about the behemoth case on collective redundancy consultation and the elusive definition of “establishment”.
An Advocate General of the European Court of Justice has recently given an opinion on the interpretation of “establishment” in advance of the point being decided by the European Court of Justice (ECJ). For those of you who want to stop reading here, Advocate General Wahl’s opinion is that “establishment” means a local employment unit, not an entire business undertaking. Phew, now that I’ve got the spoiler out of the way, read on to find out why this is important…
In case you’re one of the lucky people who doesn’t know the background to USDAW and another v. WW Realisation 1 Ltd (in liquidation) and others (to give the Woothworths case its rather cumbersome Sunday name) here’s a short summary. Once upon a time there was an EU directive called the European Collective Redundancies Directive (I know, snappy title right?). This defines collective redundancy as “the dismissal, over a period of 90 days, of at least 20 workers, whatever the number of workers normally employed in the establishments in question”.
Why is this important for employers? Because collective consultation requires a stricter and more detailed redundancy process involving, amongst other things, the finicky process of electing employee representatives. If the rules are not followed staff can claim a protective award of up to 90 days’ gross pay per employee. For many a year, UK employers had happily interpreted “establishment” as the individual site in which the potentially redundant workers were based, regardless of whether redundancies were taking place at other sites owned by the company.
Fast forward to 2008 and the sad demise of Woolworths (followed in 2010 by Ethel Austin, which was also a party to the case but for some reason never seems to get a mention) which resulted in large scale redundancies across the UK. The organisations didn’t collectively consult in relation to stores with less than 20 staff. In fact, they naughtily didn’t bother to collectively consult with larger stores either, but that’s beside the point for our purposes. Tribunal claims were raised by USDAW, (the Union of Shop, Distributive and Allied Workers) and staff in the larger stores were awarded a protective award. In line with previous cases, the tribunal held that each store was a separate “establishment” so those in stores where less than 20 people were made redundant received nothing.
USDAW appealed to the Employment Appeals Tribunal (EAT) which upheld the appeal and controversially decided that “establishment” under the Directive should mean the whole business undertaking. Overnight, the goal posts were moved and businesses contemplating (or indeed, in the middle of!) redundancy consultations at more than one site suddenly had to re-think their approach. Meanwhile, the case was appealed again to the Court of Appeal, which made a reference to the ECJ for a ruling on how “establishment” should be interpreted.
Happily an ECJ reference usually signals that we are about to get a definitive answer, the ECJ being the highest court which can deal with disputes on European legislation. However, before the ECJ gives its ruling on a case, an Advocate General will examine the case and give an opinion. These opinions are not binding on the Court, but most of the time they are followed. In this case Advocate General Wahl’s opinion is that the meaning of “establishment” is narrower than the EAT ruling suggests and should be taken to mean the local employment unit in which the workers are based. I.e. the original UK position was more or less correct in the first place and we’ve all just wasted five years of our lives anxiously wringing our hands and scratching our heads for nothing.
Of course, the ECJ may rule the other way, so if you are facing a situation where collective consultation across several sites is a possibility, our view is that it is best to continue to be cautious until the ECJ delivers a definitive decision later in the year.