Collective redundancies: the ECJ clarifies the meaning of the term “establishment”

In a press release on the Woolworths judgment, the CJEU has briefly set out its views on what constitutes an “establishment” for the purposes of collective redundancies.  David Reade QC appeared before the Court for one of the successful employers.

The Court states that it is the entity to which the redundant employees are assigned to work that constitutes the “establishment”. Employers will not therefore need to factor in employees that they are making redundant at other sites or locations when calculating whether the 20 worker threshold is met. The Court states that to give the term “establishment” a wider meaning than this would be contrary to the ordinary meaning of a collective redundancy. It recognises that the EAT’s judgment could have meant that a single employee’s redundancy had to be treated as a collective redundancy, if the employer was making cuts in its workforce at other establishments far away. 

Retail businesses, in particular, should be pleased by the Court’s decision. They will no longer need to collectively consult in relation to all redundancies in order to avoid the risk of being ordered to pay a protective award.

The case will now return to the Court of Appeal to determine whether the Woolworths and Ethel Austin stores in question can be classified as separate establishments. We are therefore likely to receive further clarification on the “establishment” test in the near future.