May 28, 2015

Collective Redundancy: European Judgment on Meaning of "Establishment"

The European Court of Justice (ECJ) has handed down its judgment in the longstanding litigation case of USDAW and another v WW Realisation 1 Ltd (C-80/14) concerning the meaning of “establishment” for the purposes of collective redundancy.

We reported on the Employment Appeal Tribunal’s (EAT) groundbreaking decision in this matter in July 2013 and again in February 2015 when the ECJ’s Advocate General (AG) issued his opinion on the issue. By way of reminder, in 2013 the EAT held that collective consultation obligations are triggered when an employer proposes to dismiss as redundant 20 or more employees in a 90-day period irrespective of the number of establishments in which the employees are located, rather than at one establishment (as had previously been the case).

The AG disagreed; his opinion was that EU law requires the number of redundancies at one establishment to be considered. The ECJ agreed with the AG: where an undertaking comprises several entities, it is the local unit or entity to which the workers made redundant are assigned to carry out their duties that constitutes the “establishment”. It is not essential that the unit in question has its own management which can independently implement collective redundancies. The case was remitted to the UK Court of Appeal which is expected to overturn the EAT’s original decision.

The ECJ’s decision will no doubt come as a huge relief to employers who have more than one site in the UK. However, it should be remembered that whether a local unit or entity is an “establishment” will ultimately be a matter of fact in each case.

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