Making redundancies and the meaning of “establishment”

The issue related to collective redundancy consultations.

Employers must carry out a collective consultation process where they are proposing 20 or more redundancies at any establishment within a 90-day period. It can be quite onerous, involving at least 30 days' consultation with recognised unions or – where you don't recognise a union – at least 30 days' consultation with employee representatives specifically elected for that purpose.

But what does the word “establishment” actually mean?

Does it mean the store in which the workers are employed to work? Or do all of a business’s stores count as one establishment?

The Employment Appeal Tribunal had decided the latter. This meant that if an employer proposed 20 or more redundancies across its entire operation within 90 days, then individuals involved would be entitled to be consulted collectively. That state of play didn’t go down well and so the ECJ’s decision to reverse the situation will be welcomed by employers.

After two years of uncertainty, the position is now quite clear.

“Establishment” means the place where the workers are assigned to work. This will normally (but not always) mean each office/shop/factory/site – so collective consultation obligations trigger when you are proposing to dismiss 20 or more people in a particular office/shop/factory/site.

More importantly, collective consultation obligations won’t apply where you will be dismissing fewer than 20 employees in one place, even though you may be dismissing more than 20 in total across your business - provided each establishment is considered to be separate. It means that employers with lots of small branches, stores or bases can more easily reduce staff numbers by avoiding lengthy consultations and associated costs.

For now, it’s back to the Court of Appeal for Woolworths and Ethel Austin to tie up some of the specific case issues. In short, Woolworths were correct in their approach all those years ago not to collectively consult with the staff in smaller stores is which fewer than 20 employees would be dismissed as redundant.