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What is an establishment?
Trowers Public Insight

What is an establishment?

The trigger for collective redundancy consultation - "20 or more redundancies within 90 days or less" - trips easily off the tongue for anyone who works within employee relations.  However, turn to the additional factor – at "one establishment" - and the certainty starts to fall away.

In the UK, the meaning of "an establishment" was thrown into doubt by a series of cases which involved the failed retailers Ethel Austin, Woolworths and Bonmarché.  These cases suggested that the number of redundancies for the purposes of collective consultation should be looked in the round across a workforce.  As this legislation has its roots in an EU Directive, the issue was referred to the European Court of Justice by the Court of Appeal and informally joined with a Spanish case which raised a similar point.

We now know what the Advocate General's reasoning is on this tricky and important issue. As readers will be aware, the European Court of Justice is not bound to follow the Advocate General.  The judges can, and sometimes do, disagree and give an opposing judgment. However, the Advocate General's opinion is always important and gives us a clear steer on what the key issues in the eventual judgement are going to be.

In Lyttle and ors v Bluebird UK Bidco 2 Ltd (Case C-182/13) (the Bonmarché case) ; Cañas v Nexea Gestión Documental SA, Fondo de Garantía Salarial (Case C 392/13); USDAW and anor v WW Realisation 1 Ltd (in liquidation) and anor (C 80/14) (the Ethel Austin and Woolworths cases) the Advocate General sensibly suggests that the concept of ‘establishment’ must have a consistent meaning across the EU Collective Redundancies Directive (No.98/59).  He finds that the ‘establishment’ is the unit to which the redundant employees are assigned to carry out their duties.  The issue of what a local employment unit is a question of fact for the national courts.   Importantly in the Collective Redundancies Directive it is not necessary to aggregate dismissals across an employer’s workforce for the purposes of determining whether the protections in the Directive apply.

The USDAW case also raised the question of whether the Directive can be relied on directly by an employee seeking a protective award against a private employer for failure to consult.  This would be possible if the United Kingdom had not implemented the Collective Redundancies Directive correctly. But as the Advocate General found no flaw in implementation there was, therefore, no issue on which the Court should rule; suggesting that no change to UK legislation is required.

Implications of the Opinion

If the Advocate General is correct, employers should be able to safely count redundancies for collective purposes on the basis of local employment units only.  Unfortunately until the full European Court of Justice decision is received, employers need to carry on and look at the number of affected employees across the whole organisation when deciding upon whether the collective consultation regime is triggered otherwise they risk claims for protective awards.  In addition, even if the judgment follows the Opinion it is to be remembered that "establishment" does not mean simply "locality".  We know from long established UK principles that an "establishment" may cover a head office and outlying depots or offices under a common management. This will remain an area where careful consideration needs to be applied to work out what the appropriate establishment is in each case.


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