Increased certainty around large scale redundancies

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The Court of Justice of the European Union (CJEU) has recently followed the previously released CJEU Advocate General’s opinion in relation to the long-running litigation around protective awards following the Woolworths and Ethel Austin insolvencies, (USDAW and another v WW Realisation 1 Limited (in liquidation), Ethel Austin Limited and another (C-80/14)).  The case has now been sent back by the CJEU to the Court of Appeal, but it is likely to be a formality that the Court of Appeal will overturn the Employment Appeal Tribunal’s decision that an “establishment” for collective consultations around redundancies should be interpreted to require the total number of redundancies across all of the establishments of an employer to be considered.  That decision had caused massive practical problems for multi-site operations ensuring that they did not fall foul of the obligations to consult collectively if 20 or more redundancies were proposed within any period of 90 days.

Whilst the decision will be bad news for many of the employees affected by those insolvencies – who are now unlikely to lose out on protective award claims against the Secretary of State under the NIF if they worked in a branch with less than 20 employees – it gives more certainty to employers and insolvency practitioners dealing with large scale, multi-site redundancies.

Considerations around “establishment” return to looking at “the unit to which workers are assigned to carry out their duties” which had previously been set out by the (then) European Court of Justice in the Rockfon decision.  That decision said that “establishment” should be broadly interpreted and can include:

  • distinct entities;
  • with a degree of permanence and stability;
  • which are assigned to perform one or more tasks; and
  • which have a workforce, the technical means and an organisational structure to operate.

To be an establishment there does not need to be legal or economic autonomy or local management which independently could undertake collective redundancy consultations.

What is an “establishment” will ultimately be a question of fact in each case, but the decision should help clarify the respective positions where large scale insolvencies result in multiple sites being acquired either in whole or in part.  It should also address the concerns that acquirers from insolvency of inheriting potentially substantial failures to inform and consult protective award claims.  If both an Insolvency Practitioner and the Buyer have more comfort in relation to the potential risks this can only help give more transactional certainty.

For more information, help or advice on employment law matters please contact Chris Maddock on 0191 211 7919 or email [email protected].