Case C-80/14, USDAW and Wilson – objecting to salami slicing the protection against collective redundancies [judgment 2015, ECLI:EU:C:2015:291]

When a chain-store makes thousands of its employees redundant without any prior consultation pursuant to the EU’s collective redundancy Directive 98/59/EC, then can that major employer really claim that the Directive did not place it under a legal obligation to consult those of its employees who were working in stores with less than 20 people? And given that the employer is now insolvent and that the Member State may not have implemented the Directive correctly, then is the Member State obliged to compensate those workers?

Facts
The employers in this reference were two large retailers which had been trading in the UK, namely, Woolworths and Ethel Austin. They had become insolvent and had entered into administration. Thousands of employees lost their jobs.

However, the employees had lost their jobs without any consultation having been made beforehand. Consequently, the workers put in claims for so-called ‘protective awards’.

Determining whether the workers can receive compensation depends on the correct interpretation being given to two pieces of EU legislation. The first piece is Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies (OJ [1998] L225/16).

Section I of Directive 98/59/EC deals with ‘Definitions and scope’, and provides:

Article 1
1. For the purposes of this Directive:
(a) ‘collective redundancies’ means dismissals effected by an employer for one or more reasons not related to the individual workers concerned where, according to the choice of the Member States, the number of redundancies is:
(i) either, over a period of 30 days:
- at least 10 in establishments normally employing more than 20 and less than 100 workers,
- at least 10 % of the number of workers in establishments normally employing at least 100 but less than 300 workers,
- at least 30 in establishments normally employing 300 workers or more,
(ii) or, over a period of 90 days, at least 20, whatever the number of workers normally employed in the establishments in question;

The salient provision is Article 1(1)(a)(ii), and the issue is whether it applies to individual branches of a chain-store which employ less than 20 people.

The Employment Appeal Tribunal decided that the Directive permitted aggregation between a plurality of “establishments”. In its view, the domestic implementing provision (section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992) did not give full effect to the Directive.

Thus, the employees had won this round of the litigation but the effect of their victory was not confined to their employer because he was insolvent and the State may not have implemented the Directive correctly.

Therefore, the issue arose as to whether the employees could claim compensation from the State. Or could the State avoid paying any compensation on the basis of EU law, for EU law gave the Member State a broad latitude to decide the scope of their law in this area?

Here, the second piece of EU legislation was relevant, namely, Directive 2008/94/EC on the protection of employees in the event of the insolvency of their employer (OJ [2008] L283/36).

Chapter II deals with provisions concerning ‘guarantee institutions’, which Article 3 explains as:

Member States shall take the measures necessary to ensure that guarantee institutions guarantee, subject to Article 4, payment of employees’ outstanding claims resulting from contracts of employment or employment relationships, including, where provided for by national law, severance pay on termination of employment relationships.
The claims taken over by the guarantee institution shall be the outstanding pay claims relating to a period prior to and/or, as applicable, after a given date determined by the Member States.

The salient provision in the Directive is Article 4, which provides:

1. Member States shall have the option to limit the liability of the guarantee institutions referred to in Article 3.
2. If Member States exercise the option referred to in paragraph 1, they shall specify the length of the period for which outstanding claims are to be met by the guarantee institution. However, this may not be shorter than a period covering the remuneration of the last three months of the employment relationship prior to and/or after the date referred to in the second paragraph of Article 3.
Member States may include this minimum period of three months in a reference period with a duration of not less than six months.
Member States having a reference period of not less than 18 months may limit the period for which outstanding claims are met by the guarantee institution to eight weeks. In this case, those periods which are most favourable to the employee shall be used for the calculation of the minimum period.
3. Member States may set ceilings on the payments made by the guarantee institution. These ceilings must not fall below a level which is socially compatible with the social objective of this Directive.

The employees submitted that they had both a directly effective right and a remedy against the Secretary of State. The essence of their submission was primarily that the law governing their case had “vertical direct effect” as a result of C-188/89, Foster v British Gas. In that context, it was pertinent that the Secretary of State for employment was already a party to the litigation in the case relating to the retail store known as Woolworths – and the Woolworths case had been joined by judicial order to the Ethel Austin case. Furthermore, the wording of the relevant statute made it clear that it was the Secretary of State who was responsible for the payment of the protective awards to all of the employees – that responsibility being set down in Part XII, sections 188-9, of the 1996 Employment Rights Act. The Employment Appeal Tribunal went on to accept this submission.

At the Court of Appeal
The Court of Appeal did not express a view on whether vertical direct effect arose in this case, and it noted instead that the point was not free from doubt. Consequently, Lord Justice Maurice Kay, who produced the leading judgment in the Court of Appeal, decided to make a reference to the CJEU in relation to the construction of the Directive and the vertical direct effect point.

The Court of Appeal was aware that similar issues about the correct interpretation of the EU’s collective redundancies Directive were already the subject of a reference pending at the CJEU (Case C-182/13, Lyttle).

The Secretary of State therefore asked the Court of Appeal to delay the litigation in USDAW and Wilson pending the outcome of the earlier Lyttle reference in which written legal observations had already been made on behalf of: the employer, the UK, Hungary and the EU Commission.

The Court of Appeal refused that request. The workers in Lyttle were not being directly legally represented whereas the workers in the present case of USDAW and Wilson were being legally represented, and they were being supported by a major trade union. Lord Justice Maurice Kay suspected ‘that to proceed to determine the case [of Lyttle] without such assistance would be considered disadvantageous’.

Questions Referred
According to the Curia website, the Court of Appeal of England and Wales has asked:

(1)(a) In Article l(l)(a)(ii) of Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies […] (“the Directive”), does the phrase “at least 20″ refer to the number of dismissals across all of the employer’s establishments in which dismissals are effected within a 90 day period, or does it refer to the number of dismissals in each individual establishment?

(b) If Article l(l)(a)(ii) refers to the number of dismissals in each individual establishment, what is the meaning of “establishment”? In particular, should “establishment” be construed to mean the whole of the relevant retail business, being a single economic business unit, or such part of that business as is contemplating making redundancies, rather than a unit to which a worker is assigned their duties, such as each individual store.

(2) In circumstances where an employee claims a protective award against a private employer, can the Member State rely on or plead the fact that the Directive does not give rise to directly effective rights against the employer in circumstances where:

(i) The private employer would, but for the failure by the Member State properly to implement the Directive, have been liable to pay a protective award to the employee, because of the failure of that employer to consult in accordance with the Directive; and

(ii) That employer being insolvent, in the event that a protective award is made against the private employer and is not satisfied by that employer, and an application is made to the Member State, that Member State would itself be liable to pay any such protective award to the employee under domestic legislation that implements Directive 2008/94/EC of 22 October 2008 on the protection of employees in the event of the insolvency of their employer […], subject to any limitation of liability imposed on the Member State’s guarantee institution pursuant to Article 4 of that Directive?