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Collective Redundancy- Uncertainty Drawing to a Close

David Reade QC (appeared for Bluebird)

On the 5 February 2015 AG delivered his opinion in Lyttle
and others v Bluebird UK Bidco 2 Ltd ,
Rabal Cañas v Nexea Gestión Documental SA
and USDAW v Ethel
. Whilst
the Judgment of the ECJ is now awaited there is considerable cause for
employers to find comfort in the reasoning of the AG for the collective
redundancy consultation in the UK.

The Issue

Since the decision of the EAT in USDAW v Ethel
Austin Ltd (In Administration) USDAW
 and Another v Unite The Union and others
UKEAT/0547/12/KN[2013] IRL 886, and
the subsequent reference by the CA to the ECJ, there has been considerable uncertainty
as to the application of the collective redundancy consultation obligation
under S.188(1) of TULRCA in the UK.

The CA reference was heard before
the ECJ in December 2014 together with a reference addressing the same issue
from Northern Ireland, Northern Irish law adopting the same language as TULRCA.
A third related issue was joined on a reference from Spain.

Opinion of the AG

The Advocate General’s Opinion was handed down on
5 February 2015, Lyttle and others v
Bluebird UK Bidco 2 Ltd,
Rabal Cañas v Nexea Gestión Documental SA and USDAW v Ethel Austinclick
here for the opinion

It remains the case that Judgment
must be awaited from the ECJ itself and there is no certainty that the Court
will follow the AG’s opinion. The omens are however good. The AG’s opinion
reflects the approach taken by the Commission before the Court, an approach
supported by the UK Government and the only employer represented, Bluebird.

The core issue in the case for the
United Kingdom concerns the use of the term “establishment” within S.188(1) of
TULRCA. It was this word that the EAT read out of the statute in the Woolworths
decision on the basis that S.188(1) did not comply with the Directive. In the
UK this has the consequence that the trigger for the collective consultation
obligation became whether an employer is proposing to make more than 20 people
redundant across the whole of their organisation within a 90 day period rather than at a specific
establishment within the employer’s structure.

Requirements of the Directive

Readers will be familiar with the
issue but a brief summation may be of assistance. Article1(1)(a) of Directive
98/59 defines collective redundancy and provides the trigger conditions for
when consultation must occur. The Directive provides two definitions of when
consultation must take place and Member States may choose between the two
different triggers. The relevant parts of 98/59 are as follows:

Article 1(1)(a) 1
For the purposes of this Directive:

  1. ‘collective redundancies’ means dismissals effected by an employer for one or
    more reasons not related to the individual workers concerned where, according
    to the choice of the Member States, the number of redundancies is:
    1. either, over a period of 30 days: at least 10
      in establishments normally employing more than 20 and less than 100 workers, 

at least 10% of the number of
workers in establishments normally employing at least 100 but less than 300

at least 30 in establishments
normally employing 300 workers or more,

  1. or, over a
    period of 90 days, at least 20, whatever the number of workers normally
    employed in the establishments in question.

USDAW’s argument

The UK choice, in S.188,
of option (ii) has been the minority choice amongst Member States. In essence
the USDAW argument was that (ii), unlike (i), did not limit the number of
redundancies to those occurring within any establishment. Thus one can look at
the number of redundancies across the entire structure of a single employer.
This poses a significant difficulty for many employers, not least where the
single employer may have a workforce spread across a number of Member States or
even both within and outside the EU. It was also argued that “establishment”
should, if it is to be applied, be given a wider meaning in the context of option
(ii) than option (i) so as to engage the obligation in a wider number of

Arguments rejected

The AG’s conclusion rejects the
USDAW argument. He reasons that there is long settled law in the Court on the meaning of the concept of “establishment”, see Rockfon C-449/93 [1996] IRLR 168 ECJ and Athinaïki
C-270/05 [2007] IRLR 284 ECJ.
That case law was concerned with the meaning of that term under Option
(i) and had concluded that establishment
meant “‘the unit to which the workers made redundant are assigned to
carry out their duties’, the local employment unit.

Perhaps not surprisingly the AG starts from the premise that where the term
“establishment” has been used in different parts of the Directive it should be interpreted
consistently, Para 38. Unless that is the Court had indicated that the interpretation
was of limited application and it had not in those decisions. His approach was
to assume that this interpretation would apply to the use of the word in the “establishment”
in the option (ii) trigger. Later in the Opinion he notes that there is no
significance in the use of the singular in (i) and the plural in (ii) in the
English version of the Directive. In other languages the same use of the plural
and the singular does not always appear.

He considered that the Court in Rockfon and Athinaïki Chartopoiïa had rejected
an interpretation of “establishment”
which equated the meaning of that term with the entire “undertaking” in
question or the corporate legal entity.
He rejects then the key thrust of the
USDAW argument, para 47:

Indeed, the approach argued for by the applicants in Cases C182/13 and C80/14 is to extend the protective procedure to all
dismissed in the course of the same restructuring exercise,
irrespective of the size of the establishment at which they worked. Conferring
the maximum level of protection by downplaying the method of implementation
would obviously be to the advantage of those workers who, under the current
understanding of the concept at issue, are not entitled to any protective
award. However, such an approach would not be consonant with the minimum
harmonisation aim envisaged by Directive 98/59, which, as the Commission
rightly stated at the hearing, does not contemplate as a starting point full
protection for all— even where the number of dismissals exceeds the
thresholds— as the temporal requirement must also be met.

It is further of note
that the AG focuses upon the argument that the definition was intended to
address the impact of redundancies in “a given local context and social environment”. In this context it is the local employment unit which
is important and he was not persuaded
that the social protection aim argued by USDAW required a different approach to
be taken. 

Factual Issue Remains

Whilst his conclusion
is that the key issue is the local unit to which employees are assigned he does
note that what these means is a matter for domestic Courts to determine in any
given situation:

Lastly, it should also be made
clear that it is for the referring courts in all three cases to determine how
exactly the local employment unit is constituted in each situation, that being
a factual matter. To take an example, if an employer operates several stores in
one shopping centre, it is not inconceivable that all those stores should be
regarded as forming a single local employment unit. As observed by the Spanish
Government, that will depend on a number of factors: (i) whether the joint
entity in question can be said to have a certain degree of permanence and
stability; (ii) whether it is assigned to perform one or more given tasks; and
(iii) whether its workforce, technical means and organisational structure are
adequate for the accomplishment of those tasks. It is not necessary for the
entity to have legal, economic, financial, administrative or technological
autonomy in order to be regarded as an establishment.


If the Court follows
the approach of the AG then UK domestic
law will return to the pre Woolworths EAT position. The C.A will allow the
appeal in the Woolworths appeal and find the decision of the EAT to have been
wrongly decided. 

As noted the AG left
open the question of a what an establishment means in any specific situation, applying Rockfon test. There is nothing radical for UK
Courts and Tribunals in directing themselves to apply the definition in Rockfon. Organisationally it is possible that an establishment may be found not be
limited to a specific geographical location, for example a sales team to which
employees are assigned that spans a wide geographic area. If however the AG’s
observations that the intent of the Directive was to focus upon the impact of
redundancies within a “a given
local context and social environment” are reflected in the Judgment of the
Court this will add force to the argument that it will only be in an exceptional
situation that the test applies so as to embrace an organisational structure
which has wide geographical reach with the “establishment” test.

There were no indications at the
hearing as to when the Judgment of the Court would be handed down. In the interim,
whilst the AG’s opinion will give cautious optimism to employers, it is prudent
to approach collective redundancies on the basis that the EAT decision remains
good law.

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