456px-Court_of_Justice_of_the_European_Union_emblem.svgThousands of workers who lost their jobs when high street retailers Woolworths and Ethel Austin collapsed have lost their legal battle for compensation.

The European Court of Justice (“ECJ”) ruled on 30 April 2015 that the former employees of Woolworths and Ethel Austin will not receive further awards of compensation as the stores that they worked at could not be defined as an “establishment” under European legislation.

In situations where an employer is making less than 20 employees redundant then the employer does not have a duty to collectively consult with the employees (unless there is a collective agreement to this effect) but must take the appropriate steps to dismiss the employee fairly, otherwise they risk a claim being made against them for unfair dismissal.

Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less then special rules apply under the Trade Union and Labour Relations (Consolidation) Act 1992. Under these rules the employer must inform and consult with the appropriate representatives of any employees who may be affected by proposed redundancy dismissal or by measures taken in connection with those dismissals.

If the employer fails to inform or consult properly then the trade union or employee representative can bring a claim for compensation on behalf of the employees. This is known as a claim for a ‘protective award’ and the amount awarded can be up to 90 days’ pay.

In 2008 Ethel Austin and Woolworths went into administration, making thousands of workers redundant. Upon these workers being made redundant in 2008 the Union of Shop, Distributive and Allied Workers (“USDAW”) made a claim for protective award on behalf of its members against Ethel Austin Limited (“Ethel Austin”) and WW Realisation Limited (“Woolworths”).

Their claims succeeded at the two Employment Tribunals they were brought before and the Tribunals made an award of, respectively, 90 and 60 days’ protective pay to the dismissed workers (about 24,000 of them). However, the Tribunals excluded from their award those made redundant from establishments where fewer than 20 workers were dismissed (about 4,500 employees). USDAW appealed the Employment Tribunal’s judgment on this ground and were successful at the Employment Appeal Tribunal, having their appeal upheld.

The Secretary of State for Business, Innovation and Skills (“BIS”) was not represented at the EAT hearing and did not submit written representations. However, as the Government would be responsible for the cost of the protective awards (as the retail businesses were insolvent), they elected to appeal the decision of the Court of Appeal. The Court of Appeal then referred the case to the European Court of Justice for guidance on two broad issues: how the relevant European Directive should be construed and, in particular, the meaning of “establishment; and whether the the Directive has direct effect on BIS.

The European Court of Justice has now ruled as follows in the case of Union of Shop, Distributive and Allied Workers (USDAW) and B. Wilson v WW Realisation 1 Ltd (in liquidation), Ethel Austin Ltd and Secretary of State for Business, Innovation and Skills:

  • The term “establishment” us a term of EU law and cannot be defined by the laws of member states.  It must, on that basis, be interpreted in an autonomous and uniform manner in the EU legal order. The Court states that, where an undertaking comprises several entities, it is the entity to which the workers made redundant are assigned to carry out their duties that constitutes the ‘establishment
  • That individual stores of companies could be defined as separate “establishments”

The ruling of the European Court of Justice therefore means that the remaining claimants cannot receive protective awards as they worked in “establishments” where less than 20 employees worked.

Chris Hadrill, a specialist employment solicitor at Redmans, commented on the claim: “USDAW has described the latest result in the European Court of Justice as ‘heartbreaking’ but the ECJ has a delicate task in balancing the rights and obligations of employees, employers, and individual member state governments.”

About Redmans Employment Team

Redmans Employment Team deal with employment matters for both employers and employees, including drafting employment contracts and policies, advising employers and employees on compromise agreements, handling day-to-day HR issues, advising on restructures, and handling Employment Tribunal cases for both employers and employees

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