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Establishing the establishment!

Employers may be encouraged by the Advocate General’s opinion issued this morning, but their enthusiasm could be short lived!

pick and mix

Up until the EAT’s decision in the Woolworth’s case  employers were only obliged to consult collectively if they proposed to make 20 or more employees redundant at one establishment within a 90-day period.

What was meant by “one establishment” was not entirely clear but had been considered to mean one location. In the Woolworth’s case the administrator assumed that this was the correct interpretation of “one establishment” and dismissed the entire workforce without consultation. However, staff in locations where there were 20 or more employees received payments in respect of the breach of collective consultation.

The hardship was that 4,400 employees, who in some cases were a short distance away from colleagues but had the bad luck of working in stores without 20 or more employees, received nothing.

Subsequently the EAT held that the words “at one establishment” should be ignored. The consequence of the EAT’s decision has been that multi-site employers must comply with collective consultation obligations in redundancy situations when considering making 20 employees (or more) redundant across the entire business regardless of locations.

The Advocate General was tasked with defining “establishment” for the purposes of collective redundancy and has this morning issued his opinion.

The opinion

The Advocate General’s opinion is (typically) slightly vague in its meaning and effect. He has stated that “establishment” represents “the unit to which the workers made redundant are assigned to carry out their duties”. That is an encouraging interpretation for employers and would support the approach adopted by many HR Professionals and employment lawyers that an establishment was rightly identified by the particular branch or location of the business – until of course the EAT’s decision in the Woolworth’s case.

The Advocate General has however also said that an “establishment” is to be defined by the national courts and there is nothing to stop the courts from implementing rules which are more favourable to employees. This leaves it open to the government to amend the law to cement the EAT’s decision to widen the “establishment”.

So where does this leave us?

We have moved one step closer to clarity on the point but we are not yet there, and the current EAT’s employee-friendly decision still stands. We shall await next steps and see if the government issue any further guidance. It is also likely that the Court of Appeal will now be asked to consider the “establishment” issue. Although the Advocate General’s opinion is not binding, it is usually followed by the courts and whilst there is uncertainty and there remains a risk in adopting this approach now, employers may be able to avoid protracted collective consultation procedures when less than 20 employees are being made redundant at any one location.

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Legal news, views, trends and tools for HR Professionals. Stay ahead. Go further