The European Court of Justice has recently clarified the rule on the need for employee consultation for collective redundancies.

Under EU law, where an employer proposes to make a certain number of employees redundant within a specific period (commonly termed “collective redundancies”), it must consult on its proposal with representatives of the affected employees before it takes any action. Whether collective consultation is required, depends on the number of terminations the employer proposes making. This threshold is set locally by individual member states. In the UK, the threshold is met when an employer proposes to dismiss 20 or more employees at one “establishment” within a period of 90 days or less.

The question arose recently in a UK case as to whether the threshold should be taken as applying to the employer’s workforce as a whole within the UK or to each of the employer’s individual establishments (offices or facilities). If the former, the likelihood of the need for employee consultation increases considerably. If the latter, consultation is likely to be required less often.

The matter was referred to the European Court of Justice and in a non-binding (but usually followed) opinion, the Advocate General (the “AG”), who advises the Court, has stated that the threshold should normally be applied to each individual establishment of the employer rather than all the employer’s establishments in the country taken together. The AG says that an “establishment” is in effect the “unit” (office or facility) where the redundant employees work.

It is for the courts of each member state to decide what establishment means in individual cases and there may be some more complex facts to consider. For instance, when an employer operates several different units within one shopping centre, the centre itself might be treated as a single establishment. The AG’s opinion sets out some criteria for national courts to take into account. For instance, how permanent the unit is and whether it can operate as a standalone entity. However, the unit does not have to be autonomous in order to be an “establishment”.

This represents a reassuring result for those in favour of more flexible European labour markets.