Woolworths redundancy appeal referred to ECJ

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Alan Chalmers, a Partner in our Sheffield office comments: the Court of Appeal decided yesterday to make a reference to the European Court of Justice (ECJ) in the controversial Woolworths/Ethel Austin collective redundancy litigation.

In USDAW v Ethel Austin (in administration) the Ethel Austin and Woolworths chains of shops had gone into administration resulting in their employees being made redundant. The employees who were members of a trade union claimed protective awards for failure to consult collectively under s.188 TULRCA, which provides that an employer is required to consult with appropriate representatives when proposing to dismiss as redundant 20 or more employees at one establishment within a 90 day period. At the employment tribunal, only those employees who were employed at premises where 20 people or more were employed succeeded in claiming protective awards. Those who worked at stores of fewer than 20 people failed in their claims. The union appealed to the EAT. The issue before the EAT was whether s.188 was to be interpreted so as to omit the words “at one establishment” in order to give effect to the core objective of the EU Directive on collective redundancies,  allowing protective awards to be made to all employees whose employer dismissed 20 employees as redundant within 90 days. As reported in our Be Alert dated 2 July 2013, the EAT held that those words should be deleted. The consequence of this was that the Secretary of State (and ultimately the taxpayer) was liable for the protective awards.

Not long before the EAT handed down judgment in Ethel Austin, a tribunal in Northern Ireland referred a similar case, Lyttle v Bluebird UK Bidco Ltd, to the ECJ. That case concerned redundancies arising out of the administration of the Bon Marche chain.

In the Court of Appeal, the Secretary of State sought to argue that the appeal in Ethel Austin should be stayed pending resolution of the Lyttle case.

However, the Court of Appeal concluded that the appropriate course of action was to refer the case to the ECJ rather than stay the appeal. The Court took into account the fact that the employees in Lyttle did not have legal representation and considered that the ECJ would benefit from the employees having legal representation. In addition, the ECJ’s judgment in Lyttle might not dispose of all the issues as the ECJ would also need to consider whether, if UK law is incompatible with the Directive, the employees should be able to rely on the Directive against the Secretary of State in any event.

In the long term, it is almost certainly beneficial to employers to have a definitive resolution of this important issue. However, although it is possible that the ECJ will join the reference with Lyttle and expedite it, given the importance of the questions raised, it is unlikely there will be a decision any time soon; the usual timetable from reference to decision is around 18 months.  In the meantime, the practical difficulties arising from the EAT decision continue. This case has important implications for large employers with multiple locations, most obviously those in the retail, logistics and hospitality sectors. Whereas previously those employers did not have to collectively consult until there were at least 20 redundancies at any one establishment, now they must do so if the overall number of redundancies amounts to 20, wherever they occur. This can cause significant problems both in terms of recognising that the obligation has been triggered and in arranging the consultation meetings if participants are at different locations. Collective consultation will be longer and more expensive for employers in this situation.