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When do collective redundancy consultations rules apply to a chain of shops?

When do collective redundancy consultations rules apply to a chain of shops?

 USDAW v Woolworths C-80/14

By Declan O'Dempsey

Today the CEJU handed down its judgment on C‑80/14 Union of Shop, Distributive and Allied Workers (USDAW), B. Wilson v WW Realisation 1 Ltd, in liquidation, Ethel Austin Ltd, Secretary of State for Business, Innovation and Skills.  Since the Advocate General’s Opinion in [5/2/15] the expectation has been that the CJEU would rule against the union’s interpretation of when the rules for collective redundancy apply, and this has now happened.  However the reasons are interesting as they represent a balance being struck the CJEU.

The case is a reply to a request by the Court of Appeal in England and Wales for a preliminary ruling on the interpretation of Article 1(1)(a) of Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies (OJ 1998 L 225, p. 16).  Normally the titles of these documents are considered a nuisance to write out in full, but in this case the title is of significance. The aim of the Directive is the approximation of the member states’ laws.

The facts are simple and well known. Woolworths and Ethel Austin 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.

When proceedings were brought under the UK’s implementation of the Directive (section 189 Trade Union and Labour Relations (Consolidation) Act 1992 (‘TULRCA’)), the employment tribunal looked at section 188(1) of the TULRCA:

‘Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals.’.

It determined that  approximately 4 500 former employees were to be denied 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.  However on appeal the UKEAT held that a reading of section 188(1) of the TULRCA compatible with Directive 98/59 required the deletion of the words ‘at one establishment’, pursuant to the obligation placed on the national court by the judgment in Marleasing (C‑106/89, EC:C:1990:395) to interpret its national law in the light of the wording and the purpose of the directive concerned.

Before the Court of Appeal, the referring court,  the Claimants submitted that the concept of ‘collective redundancy’ in Article 1(1)(a)(ii) of Directive 98/59 is not limited to a situation in which at least 20 employees in each establishment are made redundant over a period of 90 days, but encompasses a situation in which at least 20 employees of the same employer are made redundant over a period of 90 days, whatever the number of workers at the establishments in question, that is to say, the establishments at which the redundancies are made.

The Secretary of State, who would be responsible for the insolvent businesses’ payments, relied on previous CJEU case law to argue that the concept of “establishment” in the Directive means the unit to which the worker who may be made redundant is assigned.  The Court of Appeal decided that it would be appropriate to make a request for the CJEU to determine a series of questions, only one of which was answered by the CJEU.  The question which the CJEU addressed in its judgment was:

‘(1)         (a)          In Article 1(1)(a)(ii) of [Directive 98/59], does the phrase “at least 20” refer to the number of dismissals across all of the employer’s establishments in which dismissals are effected within a 90 day period, or does it refer to the number of dismissals in each individual establishment?

(b)          If Article 1(1)(a)(ii) [of that directive] refers to the number of dismissals in each individual establishment, what is the meaning of “establishment”? In particular, should “establishment” be construed to mean the whole of the relevant retail business, being a single economic business unit, or such part of that business as is contemplating making redundancies, rather than a unit to which a worker is assigned their duties, such as each individual store?

The questions went on.  In my recent blog [Drafting a good ref to the Court of Justice] I did not mention an observation made by one of the experts at the ERA seminar in Prague in the workshop on drafting requests.  She smiled on hearing that I was from the UK and said “Oh yes, you British love your “(vv)s’” and your “(aa)”’s”.  I suspect that sometimes UK lawyers are over enthusiastic about trying to have every possible question determined.  That was not the case in the Woolworths reference.  The two questions were modest, yet powerful.

So essentially the question sought to find out whether “establishment” meant the part of the undertaking in which an employer contemplates making redundancies.  The concept arose in the scoping provision of the Directive, Article 1. 

Article 1 of the directive, entitled ‘Definitions and scope’, provides:

‘1.          For the purposes of this Directive:

(a)          “collective redundancies” means dismissals effected by an employer for one or more reasons not related to the individual workers concerned where, according to the choice of the Member States, the number of redundancies is:

(i)            either, over a period of 30 days:

at least 10 in establishments normally employing more than 20 and less than 100 workers,at least 10% of the number of workers in establishments normally employing at least 100 but less than 300 workers,at least 30 in establishments normally employing 300 workers or more,

(ii)           or, over a period of 90 days, at least 20, whatever the number of workers normally employed in the establishments in question;

For the purpose of calculating the number of redundancies provided for in the first subparagraph of point (a), terminations of an employment contract which occur on the employer’s initiative for one or more reasons not related to the individual workers concerned shall be assimilated to redundancies, provided that there are at least five redundancies.”

The Directive does not define “establishment” and the CJEU noted that the term “establishment” is a term of EU law (para 45) and therefore must be given an autonomous and uniform interpretation.  This is an important interpretive principle, as can be seen when the Court makes reference to the aims of the Directive.   It means that the concept cannot be defined by reference to the law of a member state.  Again, the court’s consideration will be to achieve the aims of the Directive across the member states. Unlike the anti-discrimination Directives aims, the aims of Directive 98/59 pull in sometimes opposing directions.

Consistency of interpretation

Referring to Rockfon, C 449/93 the CJEU noted that an employment relationship is essentially characterised by the link existing between the worker and the part of the undertaking or business to which he is assigned to carry out his duties.  The member states did have a choice between implementing the duty to consult by reference to numbers contemplated as redundant based on size of employing establishment, as opposed to the alternative where the duty is triggered, over a period of 90 days, if at least 20, whatever the number of workers normally employed in the establishments in question. In the Rockfon case Denmark had chosen, as the UK has done, the first of these options.

Therefore, said the CJEU the term had been interpreted in the context previously.  Referring to  paragraph 32 of the judgment in Rockfon the CJEU noted that the term ‘establishment’ in Article 1(1)(a) of Directive 98/59 must be interpreted as designating, depending on the circumstances, the unit to which the workers made redundant are assigned to carry out their duties. It is not essential in order for there to be an ‘establishment’ that the unit in question is endowed with a management that can independently effect collective redundancies.

So in order to determine the establishment at which an employee is employed for these purposes it appears it is necessary after Woolworths to determine whether the employee is assigned to that establishment. It is likely that similar considerations will arise on that essentially factual question as arose in TUPE cases (see e.g.  CPL Distribution Ltd v Todd [2003] I.R.L.R. 28 CA (Civ Div).). Thus it may be that the correct question to ask will be to ask a similar question to the question posed in Gale v Northern General Hospital NHS Trust [1994] IRLR 292. This was a case in which the position of a trainee doctor at a particular hospital was considered. Lord Bingham M.R. stated at paragraph 12:

“He was not, in my judgment, part of the human stock belonging to the Northern General Hospital, but was somebody who was at the behest of the health authority completing his training there.”

Clearly there will be a difference between being assigned to an establishment and having it as one’s temporary contractual base on this test.

The CJEU does not answer every question on establishments but simply shifts the focus elsewhere, but its test for when there is a separate unit may be instructive. 

It points out that it is not essential in order for there to be an establishment that the unit is endowed with a management that can independently engage in making collective redundancies.

The core of the guidance is at paras 47, 49 and 51 of the CJEU judgment.  In paragraph 49 the CJEU points out that in the judgment in Athinaïki Chartopoiïa (C‑270/05), the CJEU further clarified the term ‘establishment’ (paragraph 27).   For “the purposes of the application of Directive 98/59, an ‘establishment’, in the context of an undertaking, may consist of a distinct entity, having a certain degree of permanence and stability, which is assigned to perform one or more given tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks.”

From this it appears that an establishment can be

-        a distinct entity

-        having a degree of permanence and stability

-        assigned to perform one or more tasks

-        with a workforce, technical and organisational structure allowing for the accomplishment of the assigned tasks

-        the entity in question need not have any legal autonomy, nor need it have economic, financial, administrative or technological autonomy, in order to be regarded as an ‘establishment’ (Athinaïki Chartopoiïa (C‑270/05) para 28).

The Court (at para 52) concluded that where an ‘undertaking’ comprises several entities meeting the above criteria (set out in paragraphs 47, 49 and 51 of its judgment) it is the entity to which the workers made redundant are assigned to carry out their duties that constitutes the ‘establishment’ for the purposes of Article 1(1)(a) of Directive 98/59.

I said that the focus of debate shifts now to the question of assignment.  Inevitably the scope for bringing collective redundancy claims is very much curtailed by this interpretation. Some questions remain on the issue of assignment but these are likely to be for the national court to determine in future cases.

Thus if there is a reorganisation and an area manager who works out of a store, but works at many different stores will he or she be assigned to any particular store?  Is there a separate establishment for managers? 

The language of the directive  

The Claimants had pointed to the use of the plural “establishments” in several language versions of the Directive. However the CJEU stated that this was not significant because if plural in the first option (adopted by the UK, Article 1(1)(a)(i)) the concept would be in the plural in the second and alternative implementation option (not so adopted, Article 1(1) (a)(ii)).  The CJEU said that the two methods are therefore equivalent.  UK lawyers often find the approach to language adopted by the CJEU frustrating particularly when the CJEU blithely determines that the linguistic difference on the basis of which a considerable amount of client money has been spent, is of no significance.

The CJEU reinforces this approach by pointing out that the difference between the two sub paragraphs was never considered significant in previous CJEU judgments. It makes reference to the “operative part” of the judgment in Athinaïki Chartopoiïa (C 270/05. The operative part of a CJEU judgment is the part that binds the domestic courts and is significant for future CJEU cases.  Because the CJEU in that case had not distinguished between the context of the first implementation option and that of the second, no significance would be attached to the linguistic difference between the two sub-paragraphs. Given that member states can choose between the two options, it followed that any linguistic differences in relation to scope based on the term “establishment” are of no significance.

The underlying policy

At para 48 the CJEU pointed out that because it had previously used the words ‘distinct entity’ and ‘in the context of an undertaking’, the Court had clarified that the terms ‘undertaking’ and ‘establishment’ are different and that an establishment normally constitutes a part of an undertaking.  In Athinaïki Chartopoiïa (C‑270/05), the Court referred to the aims of the Directive.   It concerns the socio-economic effects that collective redundancies may have in a given local context and social environment. 

The CJEU noted at para 59 that the member states had a choice in relation to implementation, and that indicated not only that the term “establishment” could not be interpreted differently depending on which implementation method was adopted, but also that it would run counter to the following aims of the directive:

-        the need to promote the approximation of the laws of the Member States relating to collective redundancies (see para 60)

-        to ensure comparable protection for workers’ rights in the different Member States (para 62)

-        to harmonise the costs which such protective rules entail for EU undertakings (para 62)

Although the broader interpretation for which the Claimants argued was likely to increase protection of employees in these situations (para 61), that interpretation would run counter to the above aims (para 63). In a rather less convincing argument the CJEU noted also, at para 64, that the broader interpretation might mean that the existence of a solitaire worker at a unit might trigger the consultation duty at other units which had fewer than the minimum number.  Equally it would require collective consultation for the redundancy of that single employee.

 Conclusion

The CJEU stated in para 70 that it was for the domestic court to establish whether the stores to which the employees affected by the dismissals were assigned were separate ‘establishments’. It must do that in the light of the specific circumstances of the dispute.  However in doing so a tribunal must apply the case law (Rockfon and Athinaïki Chartopoiïa)and the factors identified above.

For the Woolworths workers and unions the result is likely to be largely determined by this judgment but it raises questions about those who do not work in similar types of chain store employment. The more mobile a workforce, the less likely that they are assigned to a particular establishment.  In those circumstances the aims of the directive do not seem to pull away from the need to protect the workforce and their entitlement to collective consultation. 

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