Establishment

Key Points

  • Trade Union and Labour Relations Act 1992 s.188 ("TULRCA") definition in "Duty of employer to consult trade union representatives" is considered in this card.
  • The Equality Act 2010, in relation to Equal Pay comparators, has guidance at s.79 
  • The Overseas Companies Regulations 2009 also provide a technical definition.

Redundancy and consultation

The meaning of "establishment" has traditionally been important in collective redundancy law. Section 188 Trade Union and Labour Relations (Consolidation) Act 1992 provides that where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less it must collectively consult with appropriate representatives of the affected employees:

"Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals."

 This section implements the European Collective Redundancies Directive 98/59. There are specific provisions entitling employees to notice and to consultation about forthcoming redundancies which apply differently depending on the number of employees "at one establishment" that are to be dismissed. There is no statutory definition of "establishment" for this purpose. The courts have said that there is no comprehensive test of what counts as an establishment - it is a question of fact and degree.

Years of case law arising from redundancies at Ethel Austin and Woolworths are explored below as being directly relevant to the “at one establishment” element of the Trade Union and Labour Relations Act 1992 s.188(1) as amended by Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995, SI 1995/2587) in relation to collective redundancies.

The 1992 Act was considered by the ECJ in 1996 where it was held that a purposive interpretation is required so that a unit of employment from which redundancies are to be made (for example a branch office) will count as an "establishment" even if it does not have independent management or independent authority to dismiss employees (Rockfon AS v Nielsen & ors 1996 ICR 673, ECJ). This case and the ECJ decision in Athinaïki Chartopoïïa AE v Panagiotidis C-270/05 were decided under Article 1(1)(a)(i) of the 98/59 Directive. Article 1(1)(1)(a) provides two options to Member States under subsections (i) and (ii) on how to define collective redundancy. The UK adopted the version in (ii), namely: “Collective redundancies' means dismissals effected by an employer for one or more reasons not related to the individual workers concerned where ... the number of redundancies is ... (2) over a period of 90 days at least 20, whatever the number of workers normally employed in the establishments in question."

The Ethel Austin and Woolworths redundancies have led to a reconsideration at the European Court of the 1992 Act’s reference to “at one establishment” and its compliance with the EC Collective Redundancies Directive 98/59/EC (replacing 75/129/EEC and 92/56/EC) once again. 

Directive 98/59 EC notably does not make reference to those collective redundancies being at 'one' establishment. The Court of Justice of the European Union heard the Ethel Austin and Woolworths case on 20 November 2014 with a case from Northern Ireland (Lyttle) and the Cañas case from Spain. The Advocate General gave his Opinion on 5 February 2015, finding that it was important that there was consistency across all aspects of the 98/59 Directive (Lyttle and ors v Bluebird UK Bidco (Case C-182/13); Cañas v Nexea Gestión Documental SA (Case C-392/13); USDAW v WW Realisation 1 Ltd (in liquidation) and anor (Case C-80/14). The Advocate General held that, in his view, an establishment is the unit to which the employees who have been made redundant are assigned to carry out their duties. It is not necessary to aggregate the dismissals across all the employer’s establishments. The ECJ  confirmed in its judgement given on 30th April 2015 (USDAW v WW Realisation 1 Ltd (in liquidation) and anor (Case C-80/14) that there is no requirement to aggregate establishments for the purposes of the Collective Redundancies Directive (C-80/14). Section 188(1) TULR(C)A is compliant with the Directive. The ECJ subsequently confirmed in Lyttle that an establishment is one to which the workers are assigned to perform their duties. As the Cañas case turned on Spanish domestic legislation it has no direct relevance to the UK.

 

Previous guidance on the meaning of establishment in redundancy

In accordance with the "traditional" meaning given to the word "establishment" in UK law, prior to TULRCA, - see Clarks of Hove Ltd v Bakers’ Union CA 1978 ICR 1076, CA in which a bakery and 28 shops counted as one "establishment".

The EAT ruled in February 2002 (MSF Union v Refuge Assurance Plc & anor 2002 ICR 1365, EAT) that an "establishment" is the unit to which workers made redundant were assigned to carry out their duties. On the facts of the particular case each member of the staff concerned was assigned to a particular branch office so the relevant "establishment" for each of them was their branch office. It followed that there was no obligation to consult under TULRCA 1992 s.188 in relation to staff employed at branch offices where it was proposed to dismiss less than 20 employees .The ECJ gave further consideration to what constitutes an establishment in a case in 2007, approving its previous decision in the Rockfon (above) case. It noted that it is not essential, in order for there to be an "establishment", for the unit in question to be endowed with a management which can independently effect collective redundancies and "the entity in question need not have any legal autonomy, nor need it have economic, financial, administrative or technological autonomy, in order to be regarded as an 'establishment'" (see Athinaiki Chartopoiia AE v Panagiotidis ECJ  [2007] IRLR 284).

Each store may be a separate establishment - An examination of USDAW (Woolworths and Ethel Austin)

Woolworths and Ethel Austin were both large retailers with various outlets.  Both went into administration leading to significant redundancies.  Some of those redundant employees were members of USDAW trade union.  Those union members claimed a protective awards for a failure to consult as required in collective redundancy situations.

At first instance the tribunal took the view that each outlet was “one establishment” and so consultation was only necessary if the outlet had made more than 20 people redundant within a period of 90 days.  The Claimants appealed and on appeal HHJ McMullen QC ruled that: “the words “at one establishment” should be deleted from section 188 as a matter of construction pursuant to our obligations to apply the Directive’s purpose.”

That reference to incompatibility was to Directive 98/59 EC.  The Claimants’ solicitors issued the following press release after the judgment, “the Appeal Tribunal … ruled that the words “at one establishment” are here and after to be disregarded for the purposes of any collective redundancy involving more than 20 employees, meaning that once it is proposed that more than 20 employees in a single business are to be made redundant, their location becomes irrelevant

Subsequently, The Employment Appeal Tribunal (EAT) granted the Department for Business, Innovation and Skills (BIS) the right to appeal against the decision and the matter was referred by the Court of Appeal to the CJEU . The A-G's opinion was delivered in February 2015.  The ECJ judgment of 30th April 2015 confirmed the A-G’s opinion (see above). An establishment for the purposes of the Collective Redundancies Directive does not require aggregation of different units within the employer. The ECJ referred to Rockfon A/S v Specialarbejderforbundet i Danmark acting for Nelson and others 1996 ICR 673 and confirmed that ‘establishment’ means the unit to which the workers have been assigned. It is not essential that each unit should have its own management which could have carried out the dismissals itself. In the Woolworths case, as the dismissals had been carried out within two large retail groups carrying out their activities from stores situated at different locations throughout the UK, employing in most cases fewer than 20 employees, the employment tribunals had taken the view that the stores to which the employees affected by those dismissals were assigned were separate ‘establishments’.

The case was sent to the Court of Appeal to determine whether, on the facts of this particular case, the tribunals’ interpretation is correct in the light of the ECJ’s ruling. In the event, the ECJ judgment had confirmed that S188 TULRCA is compatible with the European Collective Redundancies Directive 98/59, hence the tribunals were permitted to regard each store as a separate establishment and the Court of Appeal allowed the appeal against the EAT judgement by consent.

Other cases

Seahorse Maritime Ltd v Nautilus International [2018] EWCA Civ 2789 is an example of individual ships within a fleet being separate ‘establishments’ for the purposes of collective consultation obligations, although the Court of Appeal stressed that its reasoning was “specific to the present issue and the circumstances of the present case”. Each ship was a ‘self-contained operating unit’ (para 44) and crew were ‘generally attached to a particular ship’.  

 

Equality Act and comparators

The Equality Act 2010 Statutory Code of Practice confirms that comparators for equal pay purposes can be on the same terms and conditions not necessarily at the same location for the purposes of ‘establishment’ in the 2010 Act’s wording. 

The wording in s.79 of that Act, pertaining to Equal Pay Comparators, is as follows:

If A is employed, B is a comparator if subsection (3) or (4) applies.

(3)This subsection applies if

(a) B is employed by A’s employer or by an associate of A’s employer, and

(b) A and B work at the same establishment.

(4) This subsection applies if

(a) B is employed by A’s employer or an associate of A’s employer,

(b) B works at an establishment other than the one at which A works, and

(c) common terms apply at the establishments (either generally or as between A and B).

For a helpful guide see the Discrimination and Pay Systems Report p.8 and p.11

The case of City of Edinburgh Council  v Wilkinson and others 2012 IRLR 202 looked at the meaning of ‘establishment’ in equal pay cases and, on appeal, “Establishment” was deemed to mean the place of work of each individual, i.e. a complex or group of buildings such as a university campus.  The claimants lost because the male and female employees carried out their work at entirely different locations. Deciding whether the individual and comparator are employed at the same establishment will be a question of fact and degree. In Wilkinson, the EAT suggested that ‘establishment’ should be construed widely, following the ECJ decision in Rockfon (above).

Overseas and off shore

The Overseas Companies Regulations 2009  define establishment as:

  • A branch within the meaning of the Eleventh Company Law Directive (89/666/EEC); or
  • Any place of business that is not such a branch that is located in the United Kingdom

In Ministry of Defence v Wallis the Court of Appeal found that there was jurisdiction to hear claims from employees working overseas.  The employees were working predominantly in army school and were overseas as a result of being the family members of those serving in the forces.  The case found that they were so connected to England that they were protected under unfair dismissal law.