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‘Establishment’ in collective redundancies 01/05/2015 The Court of Justice of the European Union has ruled on the meaning of the term 'establishment' in collective redundancies

‘Establishment’ in collective redundancies

The EU Court has ruled that where an undertaking comprises several entities, the term ‘establishment’ in the Directive on collective redundancies must be interpreted as referring to the entity to which the workers made redundant are assigned to carry out their duties.

The case relates to Woolworths and Ethel Austin, which were companies active in the high street retail sector throughout the United Kingdom, operating chains of stores under the trade names ‘Woolworths’ and ‘Ethel Austin’ respectively. They became insolvent and went into administration, which resulted in the dismissal on grounds of redundancy of thousands of employees across the United Kingdom.

One of the employees made redundant, Mrs Wilson, and the trade union USDAW, brought claims against those two companies, seeking protective awards against the employers in favour of the dismissed employees on the ground that, prior to the adoption of the redundancy programmes, the consultation procedure provided for in UK law had not been followed.

This procedure, based on the Directive, provides that where an employer is contemplating collective redundancies, he is required, among other things, to begin consultations with the workers’ representatives in good time with a view to reaching an agreement. In this case, ‘collective redundancies’ means, in general terms, dismissals effected by an employer for one or more reasons not related to the individual workers concerned, where the number of redundancies is at least 20 over a period of 90 days, whatever the number of workers normally employed in the establishments in question.

At first instance, protective awards were made in favour of a number of the employees made redundant. On the other hand, about 4,500 former employees were refused a protective award, on the ground that they had worked at stores with fewer than 20 employees, and that each store was to be regarded as a separate establishment, so that the thresholds for the consultation procedure had not been reached.

At issue was whether the expression ‘at least 20’ refers to the number of dismissals across all of the employer’s establishments in which dismissals are effected within a 90-day period, or only the number of dismissals in each individual establishment. The Court of Appeal also asked the Court of Justice to clarify the meaning of ‘establishment’, and to explain whether it covers the whole of the relevant retail business, regarded as a single economic business unit, rather than the unit to which the workers concerned are assigned to carry out their duties - in other words each individual store.

The European Court held that where an undertaking comprises several entities, it is the entity to which the workers made redundant are assigned to carry out their duties that constitutes the ‘establishment’. It also found that the interpretation of the words ‘at least 20’ requires account to be taken of the dismissals effected in each establishment considered separately.

The Directive, it said, “must be interpreted as not precluding national legislation that lays down an obligation to inform and consult workers in the event of the dismissal, within a period of 90 days, of at least 20 workers from a particular establishment of an undertaking, and not where the aggregate number of dismissals across all of the establishments or across some of the establishments of an undertaking over the same period reaches or exceeds the threshold of 20 workers.”

The ruling is here and the press release is here.

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