Council Directive 98/59/EC of 20 July 1998 regulates at European Union level the procedure to be adopted by companies intending to make collective redundancies of their employees by affording the latter minimum protection in the form of consultation through employees’ representatives prior to the termination of their employment. Member states remain free to adopt measures more favourable to the workers.
This directive has been implemented by national legislation of the member states of the EU. EU law allows member states to choose as the threshold for consultation obligations either (i) 10 dismissals “in establishments” with 21-99 workers, 10 per cent of the total “in establishments” with 100-299 workers, and 30 “in establishments” with at least 300 workers; or (ii) 20 proposed dismissals whatever the number of workers normally employed in the establishments in question.
In Malta and in Spain, the consultation requirements under the relevant transposing legislation adopts the first option. The law as it is currently set out in the UK statute book provides that only an employer who is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less must consult employee representatives.
Three different preliminary references to the Court of Justice of the European Union were made by the Industrial Tribunal of Ireland, by the Court of Appeal of England and Wales and by the Court in Spain in relation the determination of ‘establishment’ within the context of collective redundancies.
All the three companies involved had proceeded to terminate the employment of their employees on the grounds of redundancy in one or more of their business units. Two of these three companies, Woolworths and the clothing retailers Ethel Austin, had carried out mass redundancies after their insolvency.
The point at issue in each of them was the scope of the concept of establishment and whether it should be construed to mean the whole of the relevant business, part of the business-making redundancies or the unit to which a worker is assigned duties.
The applicants in the proceedings argued that the protective measures under national legislation must extend to all workers dismissed in the course of the same restructuring exercise, irrespective of the size of the establishment in which they worked. According to this reasoning, each company store was to be considered as a separate establishment such that all dismissals in an entire group would be bracketed together for the calculation of the threshold.
Consequently, they contended that the obligation to inform and consult applies whenever an employer proposes dismissals, which in aggregate exceed the thresholds even if this is spread across a number of separate workplaces.
On the other hand, the liquidators of the companies, the UK Secretary of State and the EU Commission, argued in favour of a per-establishment approach depending of the size of the store in which each worked. They were against looking at redundancies on a cross-company basis
Advocate General Wahl recently released his opinion on dismissals carried out by multi-site employers. He did not agree with the applicants’ arguments and, instead, considered that an employer is not required to aggregate the number of dismissals across all of an employer’s separate employment units when applying the threshold and considered that the concept of establishment must be construed as the unit where workers are assigned to carry out their duties. He based his opinion on the rationale of the EU Directive, which offers protection where redundancies pose a threat to the survival of local communities, and justified this approach as one consistent with previous caselaw of the CJEU. Therefore, he considered that the term ‘establishment’ should be given the meaning of a local employment unit, although he left the determination of the exact constitution of a ‘local employment unit’ in the discretion of national courts.
This opinion has been highly welcomed by employers and employers’ association as it curtails red tape on businesses. Human resources managers would not be required to gather information about dismissals happening across multi-site businesses. It has also been claimed that any different interpretation would possibly result in all redundancies being subject to collective redundancies procedures because of others that may be happening at the same time at some other site.
Although the opinion of the Advocate General is not binding, the Court of Justice of the European Union will likely follow the reasoning adopted by Advocate General Wahl. If followed, this would be a landmark judgment which will establish clearly and in a binding fashion that extent of the applicability of the EU Directive on collective redundancies.
jgrech@demarcoassociates.com
Josette Grech is an adviser on EU law at Guido de Marco & Associates.