Woolworths' appeal: questions to be referred to CJEU

When Woolworths became insolvent one of the key issues was the obligation to collectively consult. Collective redundancy consultation (where the employer needs to consult with representatives of the potentially affected employees) ought to happen where an employer proposes to make 20 or more employees redundant within a 90 day window.

Employers had previously considered this could be dealt with on a relatively local level – e.g. dismissals from the Glasgow office were unlikely to count towards the 20 when considering redundancies in the London office. This approach was taken on the basis that UK law requires the 20 or more employees to be proposed to be dismissed at one “establishment”. Failure to consult can lead to a protective award.

Following the local level approach, when the Woolworths administrator dismissed the entire workforce without consultation, staff in locations where there were 20 or more employees received payments in respect of the breach of collective redundancy consultation of 60 or 90 days’ pay. The hardship was that 4,400 employees, who in some cases were a short distance away from colleagues but had the misfortune to work in stores without 20 or more employees, received nothing.

USDAW claimed protective awards on behalf of the Woolworths shop workers who received no payments.  Whilst at Tribunal it was held that each store was one establishment, the Employment Appeal Tribunal (EAT) overturned this stating that UK law does not comply with the European Collective Redundancies Directive and that references to establishments should be disregarded. In effect this meant that wherever an employer was proposing to make 20 or more redundancies (regardless of location) the collective consultation duties triggered. 

The significance of this decisionu was immediately obvious to those working in HR. The practical issues faced included: how will the employer even know what various local managers may be doing now that dismissals 800 miles away may count; how can this be tracked and controlled; will the desire of the employer be to hold collective consultation or engineer dismissals so that they fall outside the 90 day window; when does an employer have to file an HR1 form?  Does the fact that two redundancy exercises might be two different “proposals” provide a possible work around?

The Secretary of State declined to participate in the previous EAT hearing, meaning the taxpayer who ultimately picks up the estimated £22million cost was not defended.  Now the Secretary of State has instructed legal counsel to bring the appeal to the Court of Appeal, we were hoping for a judgment that gives balance and greater guidance to organisations needing to let people go.

However, neither party at the hearing today was asking the Court of Appeal to make any decisions about the substantive issues in the case.  Rather, the Secretary of State was asking for the case to be stayed pending the outcome of Lyttle –v- Bluebird, a case from the Northern Ireland Employment Tribunal addressing very similar issues, which was referred to the CJEU in April 2013.  USDAW wanted the Court to make a reference to the CJEU in this case as well, ideally with a view to the two case being joined.

The EAT had not considered a reference to the CJEU necessary, but the Court of Appeal has now decided that a reference should be made in this case, despite the Secretary of State’s objections, which means that the current state of uncertainty will remain for the time being.

The request for a stay was refused for two reasons. First, the employees in Lyttle are unrepresented.  They have made no submissions to the CJEU about an issue which has major consequences in this country and is of considerable importance to a large number of individuals.  The court therefore felt that it may assist the CJEU to have the benefit of a legally represented party arguing the case for the individual employees.  Secondly, a decision in Lyttle would not necessarily resolve all of the issues in this case and a second referral might then have to be made to the CJEU anyway, further delaying a final decision.

The wording of the questions to be referred is due to be agreed between the parties over the next week and an expedited hearing by the CJEU will be sought.  Whether this case is joined with Lyttle will be a question for the CJEU but, if it is, that will delay the final decision unless it expedites its normal timetable which takes about 18 months from first referral.  A judgment in Lyttle was previously unlikely before October this year. 

The questions being referred to the CJEU will cover 2 issues:

  1. How should the Directive be construed and what is the correct interpretation of an “establishment”; and
  2. Does the Directive have vertical direct effect in this case.

USDAW was hopeful that the CJEU could decide whether to join and expedite the cases imminently, so watch this space!  In the meantime, employers with multiple sites will continue to face a host of difficulties trying to navigate collective redundancies.

For further information on the appeal email or connect to us on Twitter @DWF_Employment 

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.