· 2 min read · Features

Woolworths: a reassuring result

Published:

The European Court of Justice (ECJ) has handed down its decision in the Woolworths case (or the USDAW and Wilson v WW Realisation 1 Ltd [in liquidation], Ethel Austin and Secretary of State for Business, Innovation and Skills case), with a reassuring result for employers.

By way of background, Woolworths operated numerous retail stores throughout the UK.  In 2008 the company went into administration, resulting in thousands of employees being made redundant.  USDAW - the shopworkers union -  brought claims against the company alleging failures to comply with the obligations under Trade Union and Labour Relations (Consolidation) Act 1992 (TULCRA) to inform and consult collectively where 20 or more redundancies were contemplated at an “establishment”.

In the first instance, the Employment Tribunal made protective awards for employees based at the larger retail locations (where 20 or more employees were made redundant) while those at smaller shop locations (with less than 20 redundancies) received no award.  

The union appealed to the Employment Appeal Tribunal (EAT) on the basis that TULCRA did not correctly reflect the underlying EU legislation.  The union argued that the number of redundancies that triggered the requirement to inform and consult collectively should have been aggregated against all the retail locations at which the employers operated, rather than being judged on the redundancies made at each separate store.

The practical effect of this finding was that thousands of additional employees were entitled to compensation.  It also meant that, at a stroke, the obligation to collectively consult where 20 or more redundancies were planned, became potentially much more onerous for employers who operate at more than one location.

The decision was challenged in the Court of Appeal (CoA).  Given the European dimension of the EAT’s decision, the CoA sought a preliminary ruling from the ECJ.  The key question before the ECJ was how to interpret the word “establishment” when assessing an employer’s obligation to collectively consult and, in particular, whether the term “establishment” should:

- be narrowly defined to mean the specific employment site that an employee works at; or

- include all of the sites at which employees are based across the employer’s business i.e. multiple worksites at different geographic locations.

The ECJ ruled that “establishment” should be narrowly interpreted, and should be deemed to be the specific entity where individuals being made redundant were “assigned” - in effect, where they carried out their duties on a day to day basis. The ECJ has now referred the matter back to the CoA for a final determination, which is expected to follow the ECJ’s ruling.   

As a result employers will again be able to plan redundancy programmes based on the number of redundancies at a particular worksite rather than across the whole of their business.  The decision reintroduces a welcome degree of certainty for employers on what constitutes an “establishment”, and the scope of their obligations to collectively inform and consult.

Daniel Aherne is employment law partner at Ernst & Young