ECJ clarifies definition of ‘establishment’ for collective redundancies
The long awaited decision regarding the former UK retailers Woolworths and Ethel Austin has been handed down by the ECJ. The ECJ decided that each store could be a separate ‘establishment’.
There is a legal requirement to collectively consult on potential redundancies where more than 20 employees are ‘at risk’ of redundancy within a 90 day period in one ‘establishment’.
Woolworths and Ethel Austin had numerous stores at which less than 20 employees worked. The administrative receivers for the companies decided that each store was a separate ‘establishment’ and as such there was no need to consult in those stores that had less than 20 employees.
If this decision was incorrect then the companies would be liable to pay each affected employee a ‘protective award’ of up to 90 days salary. Thousands of employees were made redundant when these companies went into administration and 4500 employees worked in stores with less than 20 employees.
The ECJ stated that if a company has several ‘entities’/shops (like Woolworths did) then ‘establishment’ means ‘the entity to which the workers made redundant are assigned to carry out their duties’.
This is good news for large national employers and means (in the UK) that employers need only consult with employees in a particular “establishment” or entity within the company – in this case a particular store – if 20 or more employees in that entity are at risk of redundancy. Each entity is to be considered separately.
The case has been referred back to the UK’s Court of Appeal to determine if, based on the facts, each store was indeed a separate establishment. The Advocate General has commented that, in the example of more than one store in a large shopping centre, the stores in that centre could be considered together as one ‘establishment’ and each case will turn on its facts.
Please see here for our analysis of the previous UK decisions prior to the referral to the EC.
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