The meaning of establishment and the duty to collectively consult

The closure of Woolworths sent shockwaves down the high-street, but it also had significant implications for employment law and particularly for FE colleges operating in more than one location.

This is because the Woolworths’ closure led to a controversial development following a case brought by representatives of redundant employees of Woolworths (the Woolworths Case). The Employment Appeal Tribunal (EAT) ruled that the “establishment” test, a key principle of collective redundancy consultation under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), should be ignored as it did not properly implement the European Directive from which TULRCA stems.

The EAT’s decision has caused some concern for FE colleges operating from more than one location as it in effect extended the trigger point for the more onerous obligation to collective consult in redundancy situations. Essentially it means that FE colleges would be under a duty to collective consult in a redundancy situation where it was proposed to make 20 or more redundancies across the entire organisation, and could no longer treat each location where the FE college operates (and the number of proposed redundancies in that location) in insolation.

We consider further the story so far and the most recent developments below.

The pre- Woolworths Case position

TULRCA implements the EU Directive on collective consultation. It provides that where it is proposed that there will be 20 or more redundancy dismissals of employees, in “one establishment”, within a period of 90 days, collective consultation would need to take place. Failure to collectively consult can means a claim can be brought for a protective award of up to 90 days’ pay for each affected employee.

For FE colleges it has therefore long been the position under TULRCA that the duty to collectively consult is only be triggered where there were 20 or more redundancies proposed in one establishment. This gave an argument that where an FE College operated at different sites it only had to consider numbers of redundancies at each site, not necessarily the total number of redundancies across the different locations or sites where it operated.

The Woolworths Case – the story so far

The Woolworths case changed this position as the EAT believed that TULRCA did not properly implement the EU Directive. Notably, the EU directive itself refers to the “number of workers normally employed in the establishments in question”. Accordingly, the EAT said that the wording of “one establishment” in TULRCA, should be disregarded.
The impact of this for the FE sector was that the duty to collectively consult would be triggered where 20 or more employees were being made redundant, within a 90 day period, across an entire FE college, and not just in the particular location or site that one part of the FE college operated. Thus making it easier to trigger the threshold in relation to the duty to collectively consult.

This unpopular decision was appealed to the Court of Appeal which has since referred questions as to whether “establishment” for the purposes of the EU Directive covers all establishments across an organisation or whether it means each individual establishment and generally as to the meaning of “establishment”. Whilst the decision of the ECJ is still awaited, in advance of that decision the Advocate General has given his opinion which may offer the FE sector some hope that change is once again on the horizon.

The Advocate General’s opinion

The Advocate General’s opinion is that “establishment” for the purposes of the EU Directive means the local employment unit to which the employee at risk of redundancy is assigned – a narrower and more favourable position for employers. However, indicated that in his view the EU Directive does not preclude member states (including the UK) from adopting a wider interpretation in order to establish whether the threshold for collective consultation has been met.

He went on to suggest that it is for the relevant member state to determine the extent of an employment unit so as to establish the definition of “establishment”. For FE colleges, this could therefore mean that if they are based at more than one location that together these locations should be regarded as forming one local employment unit and as such for the purposes of whether the duty to collectively consult is triggered, the number of redundancies across both locations as a whole should be considered.

Can the FE sector therefore breathe a sigh of relief?

Unfortunately, whilst the FE sector perhaps therefore cannot yet breathe a sigh of relief, it can certainly be encouraged by the Advocate General’s opinion, which appears to at least favour a narrower interpretation as to when the duty to collectively consult is triggered (albeit unhelpfully leaving the door open for member states to decide whether they wish to offer a more favourable position for employees!).

However, for now and pending the ECJ’s ruling on this matter later this year, best practice would be to continue to approach collective consultation with caution, taking into account the number of employees being made redundant across the entire FE college (even if this spans different locations) when determining whether the need to collectively consult arises.

Charlotte Sloan is an associate at Thomas Eggar, the law firm