Case Alert : The meaning of "establishment" for collective consultation


The EU Advocate General has recommended that for the purposes of identifying when the duty to collectively consult arises, an "establishment" should be the unit to which redundant employees are assigned, rather than being an aggregation of the locations where a single employer is considering redundancies.

On 5 February 2015, the Advocate General ("AG") delivered an opinion that, if followed by the Court of Justice of the European Union ("CJEU"), will restore the meaning of "a single establishment" to a single business unit. Currently the law dictates that where an employer is required to collectively consult with employees when making redundancies across multiple parts of its business, all of those parts should be treated as a "single establishment". 

The AG's opinion was in response to referrals made in the cases of Lyttle and others v Bluebird UK Bidco 2 Ltd ("Bonmarché"), Canas v Nexea Gestion Documental SA, and USDAW v WW Realisation 1 Ltd ("Woolworths"). The cases related to the closure of stores at multiple locations and similar questions were referred to CJEU seeking guidance on the meaning of "establishment" under Article 1(a)(ii) of the EU Collective Redundancies Directive ("Directive"). Whilst the cases were separate references, the CJEU has dealt with them as one, due to the similarity of the questions referred.

This is a big issue for multi-site businesses following the surprise decision of the EAT in the Woolworths case that it is necessary to discount the words "at one establishment" from the Directive. The effect of this was that unconnected redundancies across different sites would give rise to the duty to collectively consult where total number of redundancy dismissals would be 20 or more within a 90-day period.

The AG recognised that the term "establishment" had previously been determined by the CJEU in relation to Article 1(a)(i) of the Directive and advised that it would be "nonsensical to envisage a fluctuating interpretation" which would remove legal certainty. As such, it repeated the CJEU's previous ruling on the meaning of "establishment" in Rockfon, that an establishment is the local employment unit to which an employee is assigned to carry out their duties. The AG's opinion is that the Directive does not require a company to aggregate the number of dismissals across its entire organisation for the purpose of determining whether it will exceed 20 or more redundancies within a 90-day period. Importantly, the AG was also clear that such an aggregation is not precluded by the Directive.

The effect of the AG's opinion, if it is endorsed by the CJEU, will be a return to how practitioners and HR professionals approached this topic prior to the EAT's surprise decision in the Woolworths case. The question of whether employees are assigned to a local employment unit for collective consultation purposes will be a question of fact for an employment tribunal to determine, based upon established and understood principles. This will include considering the degree of permanence and stability of a location and assessing the workforce and wider organisational structure. It is not necessary for the unit to have legal, economic, financial, administrative or technological autonomy in order to be regarded as an establishment, but these will be relevant considerations.

The AG provided an opinion on the Canas case that fixed-term contracts which are terminated do not count towards the collective consultation trigger, unless the employees are made redundant before the date the contracts are due to expire. The AG also declined to advise on whether redundant employees of insolvent companies should be able to claim against the UK government for failing to properly implement the Directive.

Whilst the AG's opinion is an indicator as to how the CJEU will determine the referred cases, it is not binding. Now, employers must wait for the CJEU's decision, which will rule how employment tribunals must interpret the question of "establishment" under the Directive.