12th February 2015

Establishing the meaning of ‘establishment’ in redundancies

Collective Redundancies

There are currently three cases to be heard by the Court of Justice of the European Union (“CJEU”) on the issue of what constitutes an ‘establishment’ for the purposes of collective redundancies. UK law currently provides that when 20 or more employees are to be made redundant within a period of 90 days at one establishment, they must be consultedcollectively beforehand. Consulting collectively is generally more burdensome and onerous than consulting individually. It requires the employer to consult with the employees, or any representatives at the same time. The process must begin 30 days before the intended redundancies are planned to take place (45 days if there are more than 99 staff being made redundant). The Secretary of State for Business, Innovation and Skills also needs to be notified as part of the consultation. The process takes longer and employees can make claims for protective awards of up to 90 days’ pay if the employer fails to collectively consult.

Question of establishment

There has been much discussion recently as to what exactly constitutes an ‘establishment’. Does an establishment refer to each individual place of work? Or does the European interpretation of establishment enforce consideration of all redundancies across a company within a 90 day period (ie all redundancies across all of the offices/units of work). Clearly the distinction has a great impact procedurally and financially on employers.

Advocate General’s opinion

The Advocate General has given his opinion on the matter. He has opined that, “the ‘establishment’ is the unit to which the redundant employees are assigned to carry out their duties and it is not necessary to aggregate the dismissals across all of an employer’s establishments”. This would imply that an employer need only consider collective consultation when there are 20 or more redundancies made at the same unit of work – a relief for employers.

It is important to note that the Advocate General’s opinion is often used as a recommendation to the CJEU and is in fact often implemented by the court. However until the CJEU delivers its judgment, the opinion is not legally binding. At this stage it is a good indicator on which way the court is likely to lean.

Advice

When employers are being forced to look at multiple redundancies, always bear in mind the potential requirement to collectively consult with the employees (as opposed to individual consultation). Carrying out the correct procedure will prevent unwanted claims. For now it would appear that the interpretation of an establishment is in favour of one particular unit of work. This would be favourable for the employer. However it is still not guaranteed to be implemented by the CJEU. Keep an eye out for its awaited judgment – this will provide final clarity on the matter.

Andrew Wallace
Trainee Solicitor – Employment Law
@EmpLawyerAndy
www.blackadders.co.uk

 

 

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