19 June 2015

Employers' duty to consult on collective redundancies clarified

Employers proposing to make 20 or more redundancies need only consult with employees at a particular 'establishment' if there are to be 20 or more redundancies at that establishment, the European Court of Justice (ECJ) has confirmed.

An EU Directive requires employers to consult collectively with employees when they propose to make more than 20 redundant within a set period (a 'collective redundancy').  Failure to do so means employees can claim a 'protective award' – which can be expensive for employers who get it wrong.

However, the wording of the UK law implementing the Directive has led to uncertainty over whether there is an obligation to consult in circumstances where:

  • it is proposed to make 20 or more redundancies in all; but
  • the employer has more than one 'establishment'; and
  • there are fewer than 20 redundancies at each establishment.

Historically, UK Employment Tribunals have said that the requirement to consult at a particular establishment is only triggered where 20 or more employees are made redundant at that establishment. If fewer than 20 redundancies are to be made at that establishment, no collective consultation is required.

However, in 2014 the UK Employment Appeals Tribunal ruled that UK law was inconsistent with the Directive - that a UK employer proposing to make 20 or more redundancies in all had to consult collectively.  It did not matter if there were fewer than 20 redundancies at any particular establishment. This created a problem for some employers because it meant that a single redundancy at 20 (or more) separate establishments could trigger a requirement for collective consultation, even if the reasons for the redundancies at each place were different and/or were unrelated.

The Court of Appeal then referred the matter to the ECJ. The ECJ has ruled that an 'establishment' means a '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'. If a business has more than one unit meeting those criteria, each is an 'establishment' if it is a unit to which workers are assigned to carry out their duties. It does not matter whether the unit has an independent management that can decide to make collective redundancies or not.

In the UK, it is now clear that an 'establishment' will usually mean, for example, each particular office, factory, site or shop in the employer's business; and the requirement for collective consultations will usually only be triggered if an employer plans to make 20 or more redundancies in a particular establishment.

Notably, if an employer is making 20 or more redundancies in total across the business, there is usually no obligation to consult if there are fewer than 20 redundancies at each establishment. This will benefit businesses whose staff are spread across a number of establishments (small offices, factories, etc) – with fewer than 20 employees in any of them.

There may, however, be rare instances where a business has assigned workers to units in a way that means an 'establishment' comprises more than one individual office, etc. If so, redundancies from across different offices, factories, and so on, making up that unit would have to be aggregated to determine if consultation is required. If in doubt, businesses should take advice.

Operative date

Now

Recommendation

Where an employer is making 20 or more employees redundant, but there are to be fewer than 20 redundancies at each of its 'establishments', the employer may now make those redundancies without entering into collective consultations.

Case ref:

USDAW and Wilson [2015] EUECJ C-80/14

If you have any queries regarding this topic, or want to know how this could affect your business, please contact Head of Employment Ian Dawson on 0113 297 7735 or at idawson@shulmans.co.uk.