The thresholds are alternatives and Member States were free to decide for themselves which they chose to adopt. For convenience I will describe them as Option 1 (the at least 10 and subsequent sub clauses) and Option 2 (the at least 20). Most Member States adopted Option 1, whereas the UK, with Sweden, Luxembourg, Netherlands and Portugal, adopted Option 2. It will be noted that Option 1 may be triggered by as few as 10 redundancies if that represents 10% of the workforce at an ‘establishment’. The word ‘establishment’ therefore appears in the Directive but not explicitly in Option 2 other than in the context of the sentence ‘whatever the number of workers normally employed in the establishments in question’. The Union therefore argued that the intention of the Directive was not to limit Option 2 to the concept of the ‘establishment’ but that it was intended that the test was to be applied to the employer as a whole and that Option 2 required only consideration of whether 20 or more redundancies had been made in a 90 day period across the whole workforce of the employer. In the specific example of the Woolworths case itself the number of employees at each store would then be an irrelevance; Option2 would be engaged because more than 20 employees had been made redundant across the whole business. In the case of an insolvency that would significantly increase the breadth of any protective award.
Before the Employment Appeal Tribunal in the UK UCATT succeeded in persuading the Appeal Tribunal that their construction of the Directive was correct and that S.188 had not properly implemented the Directive; in that it had incorporated the concept of ‘establishment’ which was not intended to apply to Option 2, see USDAW v Ethel Austin Ltd (in administration) and WW Realisations (in administration)  IRLR 686. In order to give effect to this construction of the Directive the EAT gave a purposeful interpretation to S.188 applying it as if ‘establishment’ were not present.
In the context of insolvency, where there is likely to be a central decision on redundancies, the decision is not difficult to implement, although as noted it potentially increases the scope of any protective award. In the context of normal industrial relations, within a continuing business, the decision presented many problems. A employer had to consider whether in any 90 day period there had been more than 20 redundancies across the whole of the workforce. These might consist of wholly disconnected smaller groups of redundancies in different locations. Equally there was the conceptual problem of the employer whose workforce spanned more than one Member State, it was unclear whether it was necessary to count redundancies in other Member States, which may in fact themselves have adopted the Option 1 regime. The decision therefore caused consternation amongst UK employers. As the decision involved an insolvent company and the protective award in the case was being underwritten by the State the UK Government intervened in the case and appealed the issue to the English Court of Appeal.
The same issue had arisen in Northern Ireland in connection with redundancies within a chain of shops called Bonmarché, which were operated by a company called Bluebird UK Bidco 2 Limited. The legislation on collective redundancies in Northern Ireland mirrored S.188. In Northern Ireland the Employment Tribunal had stated a reference on the issue of the requirements of the Directive directly to the ECJ. The English Court of Appeal referred further questions. These references were then heard together with a reference from Spain, Rabal Cañas v Nexea Gestión Documental SA, which raised separate but related issues; the Spanish Legislation implementing the Directive has used the term ‘undertaking’ rather than establishment.
The Advocate General identified that the main issue in the references was to identify the relevant unit for the purpose of calculating whether the thresholds for consultation applied.
The ECJ confirmed that ‘undertaking’ and ‘establishment’, which are both terms of EU Law, have distinct meanings. Referring to previously decided case law of the Court, in particular Rockfon (C-449/93) and Athinaïki Chartopoiïa (C-270/05), it stated that establishment means the unit to which the workers made redundant are assigned to carry out their duties. Further that it was not essential in order for there to be an ‘establishment’ that the unit in question is endowed with a management that can independently effect collective redundancies. ‘Establishment’, in the context of an undertaking, may consist of a distinct entity, having a certain degree of permanence and stability, which is assigned to perform one or more given tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks. Thus an undertaking may consist of a number of separate ‘establishments’.
On the apparent difference between Option 1 and Option 2 the Court concluded that establishment was intended to have the same meaning in both parts of the Directive and that Option 2 did not mean that the threshold was to applied considering the number of redundancies across all the establishments of an employer; it was concerned with each specific establishment. To construe Option 2 otherwise would greatly increase the burden of the impact of Option 2 over Option 1 and this was not consistent with the objective of the Directive to bring about the approximation of the laws of Member States on collective redundancy.
The effect of the decision is then to confirm what had been the understanding of the Directive in the UK prior to the decision of the EAT in Ethel Austin: that the duty was triggered by considering the number of employees made redundant in each establishment. Thus in the case of Woolworths the duty could not arise where less than 20 employees were employed at a particular shop.
The issues raised through the collective redundancies effected by administrators in the Woolworths case and other large scale redundancies carried out in the course of insolvencies in the recent times have raised wider issues in the UK. As noted above the effect of a failure to consult is likely to be that a substantial proportion of the protective award will be borne by the State through the Redundancy Payments Office. Thus it might be said that where consultation has not taken place in order to more quickly reduce salary costs the interests of secured creditors are being placed above those of the employees with financial consequences for the State. This has led to the UK Government calling for evidence from stakeholders on whether changes are necessary to the collective consultation in insolvency situation. The UK Government is presently considering the submitted evidence but it would appear likely that changes will be contemplated which will directly impact on redundancies within insolvency in the UK.