01 May 2015

By Michael Ford QC.

In the 1970s AZCO, a multinational with employees in various European countries, decided it would make about 5000 workers redundant. It took care to work out in which Member State the costs of redundancies were lowest, and sacked the workers there. The response from the European Community was Directive 75/129 on collective redundancies (now Directive 98/59). An early measure of social protection, the Directive emphasised in its preamble its primary objective: "that greater protection should be afforded to workers in the event of redundancies while taking into account the need for balanced economic and social development".

To meet that objective, while the Directive didn’t stop employers making employees redundant, it required them to engage in collective consultation about the need for “collective redundancies”. The European Court of Justice (ECJ) later made clear that Member States had to introduce effective remedies for failure to meet this obligation, which in the UK took the form of protective awards under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).

About 40 years later, in a different economic and political climate, in 2009 Woolworths went into administration. Of its 27,000 workers, over 3,000 happened to work at stores which employed fewer than 20 workers. Another chain store, Ethel Austin, employed more than 1,000 employees at those of its stores with fewer than 20 employees. Those workers were not, on the face of the domestic legislation, entitled to a protective award because TULRCA only triggered the duty to consult if 20 or more employees were made redundant at “one establishment” over a 90-day period. But the definition in Article 1(1)(a)(ii) of the Directive was different. It referred to at least 20 [redundancies], whatever the number of workers normally employed in the establishments in question (my emphasis).

The EAT, presided over by the late Jeremy McMullen, held that the Directive should be interpreted in accordance with its core objective, of worker protection, just as the ECJ had done in interpreting another provision of Article 1 in Rockfon. This, coupled with the wording of Article 1(1)(a)(ii) - my elder son’s “wotever” - meant, the EAT held, that it could apply where a single employer, like Woolworths, made more than 20 workers redundant - either because you aggregate the establishments or because Woolworths was itself a single establishment .

The ECJ has now, in effect, reversed that ruling. The UK representative among the five judges was Christopher Vadja who, in a nice historic accident, while in practice as a QC represented the government in one of the leading case on collective consultation under the Directive (Mann v Secretary of State). As always in a judgment which has to be agreed sentence by sentence among five judges, the language is terse. But the underlying message is clear. It is not encouraging for those who put faith in legal processes of collective consultation.

The approach of the ECJ was very literal, focussing on the meaning of the term “establishment”. Adopting the same interpretation of that term it had used in Rockfon, it held that “establishment” meant the unit to which workers were assigned. It did not, therefore, require aggregation of workers across establishments of the same employer. Each worker at Woolworths will, presumably, be found to be assigned to his or her particular store. About 4,000 workers will receive no protective awards, whereas their colleagues who are assigned to stores with at least 20 employees will do so.

What of the objective of worker protection? What of the rule, trotted out to law students, that the ECJ interprets Directives teleologically, in accordance with their purpose? For example, in Rockfon the ECJ had adopted a particular definition of “establishment” in a different provision in Article 1 in order to widen the scope of the Directive, precisely in order to achieve the objective of worker protection. The simple “reading across” of the same definition in USDAW, however, undermined that purpose.

The ECJ acknowledged this result - that interpreting Article 1 as the EAT had done would “significantly increase the number of workers eligible for protection under Directive 98/59, which would correspond to one of the objective of that Directive”. But it was not deflected. The hint is in the quote: worker protection, note, is now only “one” objective, not the primary objective of the Directive. And there was, according to the ECJ, another objective: to “harmonise costs which such protective rules entail for EU undertakings”. The envisaged harmonisation is, naturally, downwards not upwards; and this objective, you can probably guess, cancelled out the other one, of worker protection.

So the ECJ fell back on the literal approach. It would be contrary to the “ordinary meaning” of “collective redundancy”, it held, if a single worker at one “establishment” could aggregate himself with others at working different establishments. One is tempted to ask: whose “ordinary meaning” is this? Clearly not the ordinary meaning of “collective redundancy” to the workers at Woolworths and Ethel Austin, who might be surprised to learn that a single decision taken by a large corporation to make thousands of them redundant was not within the ordinary meaning of “collective redundancy”. Any consultation should, presumably, have covered all the employees, not just those at stores employing more than 20 workers.

To most it looks like the exemplar of a “collective redundancy”; but perhaps not from an expensive fish restaurant in Luxembourg.

The ECJ decision follows on from its early ruling in Alemo-Herron, on TUPE, where it again departed from a progressive ruling of an EAT presided over by HHJ McMullen and, for the first time, recognised the fundamental right of employers to conduct a business. It appears that the ECJ is increasingly reflecting the austerity politics of (almost) all the governments of Member States. Social Europe, and social dialogue, is presumably another unaffordable luxury, now to be quietly ditched in the interests of business and an unarticulated political ideology.