Redundant establishment

The Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) states that, if an employer proposes to make 20 or more employees redundant at “one establishment”, they have to collectively consult in advance of the dismissals. In Usdaw and ors v WW Realisation 1 Ltd (in liquidation) and Ethel Austin Ltd and anor, the Court of Justice of the European Union (CJEU) held that when an undertaking is made up of several entities, it is the one to which the redundant workers are assigned that constitutes the “establishment”, not the business as a whole.

Basic facts

When Woolworths went into administration at the end of 2008, it made 27,000 employees redundant. The clothing retailer, Ethel Austin, subsequently went into administration in March 2010, making about 1,700 employees redundant. The shop workers’ union, Usdaw, claimed that both companies had failed to consult over the redundancies in breach of section 188 TULRCA and that their members were therefore entitled to protective awards.

Relevant law

Section 188(1) states that “where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals…appropriate representatives of…the employees”.

Decisions of lower courts

The two employment tribunals held that, as each store had to be regarded as a separate “establishment”, neither employer had a duty to consult about staff who worked in stores employing fewer than 20 employees. However, the EAT disagreed, holding that, for TULRCA to be compatible with the Collective Redundancies Directive, it had to disregard the words “at one establishment”. This meant that there was an obligation to consult whenever an employer proposed to dismiss as redundant 20 or more employees within a period of 90 days or less, regardless of the particular establishment at which the affected employees worked.

The Court of Appeal stayed the proceedings and asked the CJEU to decide whether the expression “at least 20” in the directive referred to the number of dismissals across all the establishments within a 90-day period, or only to the number of dismissals in each individual establishment. It also asked the Court to clarify the meaning of “establishment”.

Decision of CJEU

The CJEU held that that the term “establishment”, which is not defined in the directive itself, is a term of EU law and cannot be defined by reference to the laws of the member states. It must, therefore, be interpreted in an “autonomous and uniform manner” under EU law. On that basis, it held that where an undertaking comprises several entities, it is the entity to which the redundant workers were assigned to carry out their duties that constitutes the “establishment”, not the retail business as a whole.

As for the dismissals in this case, the Court noted that since they were effected within two large retail groups carrying out their activities from stores in different parts of the UK, generally employing fewer than 20 employees, the two original tribunals had decided that the stores to which the dismissed employees were assigned were separate “establishments”. As such, the Court of Appeal now had to establish whether that decision was correct given the definition of establishment provided by the CJEU.