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Meaning of ‘establishment’ for collective consultation

Employment Law & HR
BG Purple

It is not only Parliament or Europe who can change employment rules; the judiciary can occasionally radically reinterpret laws that we thought were well established and leave employers and employment lawyers alike scratching their heads. 

One such recent case is the meaning of what constitutes an ‘establishment’ when assessing whether or not there is an obligation on an employer to collectively consult with its staff over large scale redundancies.  Under the Trade Union and Labour Relations (Consolidation) Act 1992, an employer is obliged to collectively consult with a trade union (or staff representatives in the absence of a union) in any case where the employer is proposing to dismiss as redundant 20 or more employees in a 90 day period at “one establishment”.  The Courts have until now always taken a conservative view  of what constitutes one establishment and there case law has consistently suggested that employers with many different locations of work e.g. shops, offices, should treat each one as a separate establishment.  Only those locations where 20 or more staff are being dismissed will be caught within the collective consultation rules. 

The case of USDAW v Woolworths, however, have thrown the settled case law into some confusion.  This case followed on from the insolvency of the Woolworths (and Ethel Austin) chains.  Each individual store was treated by the employer as a separate establishment with the result that no collective consultation was required in respect of any store with fewer than 20 staff.   

The EAT controversially held that it had to adopt a purposive approach to the relevant EU Directive from which the provisions are drawn i.e. interpret the provisions in such a way as to maximise employee rights.  In this case, the EAT did this by simply disapplying the restriction that each establishment should be viewed separately and instead looked at the business as a whole.  As far more than 20 employees were dismissed throughout the business, this meant that every employee in the insolvent group was entitled to an award in respect of the failure to collectively consult. 

This case has huge ramifications for any employer operating over multiple sites who is making redundancy.  In light of the EAT’s decision, such an employer would be advised to take into account all staff being dismissed across the business in determining whether or not there is a duty to collectively consult.  

It is not yet known if there is to be an appeal in this case, but, unless and until a higher court has the opportunity to review this decision, employers operating multiple sites should proceed with caution in assessing whether or not there is a requirement to collectively consult.

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