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Collective Consultation: The Meaning of 'Establishment'

The European Court of Justice (ECJ) has ruled in the Woolworths and Ethel Austin cases that the term 'establishment', in the collective redundancy legislation, refers to an individual workplace, and not to the employer’s business as a whole.

The Obligation to Collectively Consult
Employers are required, by law, to undertake collective consultation  where ‘at least 20’ redundancies are to be made within a 90 day period, ‘at one establishment.’ The question put forward to the ECJ in the Woolworths/Ethel Austin cases was: does ‘at one establishment mean across the employer’s business as a whole? Or at each individual site? 

Woolworths/Ethel Austin Overview
In 2013, the Employment Appeal Tribunal (EAT) overruled the Employment Tribunal’s (ET) first instance decision, concluding that the ET had failed to reflect the EU directive in reaching its decision. The EAT found that the term ‘establishment’ should be interpreted as meaning the employer’s establishment as a whole, not each individual site. The result of this finding was that an additional 4,443 employees from smaller Woolworths/Ethel Austin stores became entitled to a protective award of up to 60 days’ pay.

The implications of this decision were huge for employers throughout the UK, particularly those with multi-site businesses and a large workforce.

The EAT’s decision was appealed to the Court of Appeal which, in turn, asked the ECJ to clarify the meaning of ‘establishment’: Does it mean the whole of the relevant retail business, regarded as a single economic unit? or, each individual location to which the workers are assigned?

The ECJ has now concluded that the term ‘establishment’ means the ‘the entity to which the workers made redundant are assigned to carry out their duties’ and not the business as a whole.

Employers throughout the UK can breathe a sigh of relief following this ruling. Now, if employers are forced to make more than 20 redundancies, across multiple sites, the requirement to undertake a 30 day collective consultation period with employees will only kick in if 20 or more employees are to be made redundant at one site.

For any further guidance or advice on this issue, please do not hesitate to contact us.

Although correct at the time of publication, the contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.