The European court of justice yesterday ruled in favour of the UK Government in the landmark ‘Woolworths‘ case.
The long-awaited decision will be welcomed by business leaders and according to lawyers at national law firm Irwin Mitchell, it will significantly reduce red tape and the costs associated with redundancy programmes.
The judgment, which has implications for large companies across the UK, relates to a case involving former Woolworths and Ethel Austin employees who were made redundant in 2008 and 2010 respectively.
The USDAW union, acting for the affected staff, brought claims in the Employment Tribunal for protective awards of up to 90 days‘ pay per employee (known as protective awards). Whilst staff working at larger stores received such awards, over 4,000 employees of the doomed retailers did not.
This was because the Tribunal decided each individual store counted as one ‘establishment‘ and, where there were fewer than 20 employees at a particular store, those employees were excluded from the collective consultation requirements and so were not entitled to protective awards.
USDAW successfully appealed to the Employment Appeal Tribunal (EAT) which decided in July 2013 that the UK legislation should be re-written in line with EU principles, so that the establishment where the workers were based became irrelevant.
The result was that employers had to collectively consult whenever there were 20 or more redundancies across their entire business. This greatly increased the likelihood that collective redundancy obligations would be engaged, and made it practically difficult for large employers to ensure they were complying with their obligations and were able to carry out headcount reductions quickly and efficiently.
Having declined to participate in the EAT hearing, the UK Government brought an appeal against the court‘s decision. The case was then heard last November by the Court of Appeal and referred to the Court of Justice of the European Union (CJEU).
Today‘s CJEU decision has backed the UK Government and Advocate General guidance earlier this year which said that UK law and the interpretation of the European Collective Redundancy Directive were compatible. This paves the way for the Court of Appeal to reverse the decision of the EAT.
The ruling will lead to less costly and time-consuming redundancy exercises as companies will only have to collectively consult (e.g. consult in accordance with minimum timescales) where 20 or more staff at one establishment are to be made redundant.
Christopher Tutton, Employment partner at Irwin Mitchell, said:
“We have now gone full circle and re-established the ‘establishment‘ test. Although it is not a huge surprise with the Court following the guidance from the Advocate General in February, it will certainly provide relief for businesses, particularly those with multiple sites, and greater certainty on an already complex area of law.
Last month, the Insolvency Service published a call for evidence on the collective redundancy rules for employers facing insolvency. Although the Woolworths decision has provided some comfort for business owners in the meantime, a wider policy review on this area of law will be welcome.”