Under the Collective Redundancies Directive, employers have to consult with workers' representatives in good time to try to find a way of avoiding the redundancies or reducing the number of workers affected.
In response to a reference by a German court - Junk v Wolfgang Kühnel (Case C-188/03) - about when that obligation kicks in, the European Court of Justice (ECJ) said it is when the employer tells workers of an intention to make some or all of them redundant, not once they have given notice to terminate the contracts.
What were the basic facts?
Ms Junk worked as a care assistant for AWO, which supplied domestic care services employing over 400 staff. The company announced it was in financial difficulties in January 2002 and liquidation proceedings started in May. After consultation with the works council, the liquidator agreed a compensation agreement in May 2002.
The liquidator informed the works council on 19 May that, as a consequence of the closure of the company, he intended to terminate all remaining contracts of employment (including that of Mrs Junk), in compliance with the maximum three-month notice period, and to carry out a collective redundancy. At the end of June, Ms Junk was duly given three months' notice of redundancy.
On 17 July, she challenged her redundancy, saying it was ineffective.
What does the legislation say?
Article 2 (1) of the Collective Redundancies Directive says, among other things, that "where an employer is contemplating collective redundancies, he shall begin consultations with the workers' representatives in good time with a view to reaching an agreement."
Article 3 (1) requires employers to "notify the competent public authority in writing of any projected collective redundancies." And the redundancies notified to the authorities must then "take effect not earlier than 30 days after the notification referred to in Article 3(1)", according to Article 4.
The German court noted that although the directive says that these obligations should be complied with before the redundancies are implemented, it does not say what it means by "redundancy". So it was not clear to the court when the procedures laid down in Articles 2 and 3 should take effect and therefore turned to the ECJ for guidance.
What was the ECJ asked to decide?
The German court referred the following questions to the ECJ:
1. Does the reference to "redundancy" in the directive refer to the notice of dismissal, or does it mean the termination of the employment relationship when the period of notice expires?
2. If "redundancy" means the notice of dismissal, does the directive require that both the consultation procedure under Article 2, and the notification procedure under Articles 3 and 4 should be concluded before the notices of dismissal are announced?'
First question: The ECJ said that the wording in the directive refers to an employer who is "contemplating" collective redundancies, which, by definition, corresponds to a situation in which no decision has yet been taken. The terms used in the legislation therefore indicate that the obligations to consult and to notify arise prior to any decision by the employer to terminate contracts of employment.
The event constituting redundancy is, therefore, the declaration by an employer of his or her intention to terminate the contract of employment.
Second question: The ECJ said that Article 2 imposes an obligation to negotiate. This, it said, would have no impact if the employer could terminate the contracts of employment at the beginning of, or during, the negotiation procedure. As such, a contract can only be terminated once the consultation procedure has been concluded.
An employer is only entitled, therefore, to carry out collective redundancies after the conclusion of the consultation procedure in Article 2 and after notification of the projected collective redundancies in Articles 3 and 4. As far as UK case law is concerned, the ECJ has confirmed that it is correct to say that consultation must begin as soon as the employer contemplates redundancies.