Cases
Junk v Kuhnel
[2005] EUECJ C-188/03
“The legal framework
Community law
In those circumstances, the Arbeitsgericht Berlin decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:
-. Is [the directive] to be interpreted to the effect that -redundancy- [-Entlassung-] within the meaning of Article 1(1)(a) thereof is to be construed as meaning the notice of dismissal [Kündigung-] as the first act in bringing the employment relationship to an end or does -redundancy- mean the termination of the employment relationship upon expiry of the period of notice?
2. If -redundancy- [-Entlassung-] is to be construed as meaning the notice of dismissal, does the directive require that both the consultation procedure under Article 2 of the directive and the notification procedure under Articles 3 and 4 thereof must have been concluded before the notices of dismissal [-Kündigungen-] are announced?-
The questions submitted for a preliminary ruling
The object of the dispute in the main proceedings is to assess the lawfulness of a redundancy in the light of the consultation and notification procedures set out in Article 2 and in Articles 3 and 4 of the directive respectively. For the purposes of that appraisal, it is necessary to determine at what point in time a redundancy occurs, that is to say, the point in time at which the event constituting redundancy takes place.
The resolution of the dispute in the main proceedings thus calls for clarification of the content of the concept of -redundancy- within the meaning of the directive.
Article 1(1)(a) of the directive defines -collective redundancies- but fails to indicate the event triggering redundancy or to refer in this regard to the laws of the Member States.
In this connection, the need for uniform application of Community law and the principle of equality require that the terms of a provision of Community law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope must normally be given an autonomous and uniform interpretation throughout the Community, which must take into account the context of the provision and the purpose of the legislation in question (see, inter alia, Case C-287/98 Linster and Others [2000] ECR I-6917, paragraph 43, and Case C-55/02 Commission v Portugal [2004] ECR I-0000, paragraph 45).
That being so, the concept of -redundancy-referred to in Articles 2 to 4 of the directive must be given an autonomous and uniform interpretation within the Community legal system.
The first question
By its first question, the Arbeitsgericht is in substance seeking to ascertain whether Articles 2 to 4 of the directive are to be construed as meaning that the event constituting redundancy consists of the expression by the employer of his intention to put an end to the contract of employment or of the actual cessation of the employment relationship on the expiry of the period in the notices of redundancy.
According to the information provided by that court, the term – used in the German-language version of the directive refers, in German law, to the actual cessation of the employment relationship and not to the expression by the employer of his intention to put an end to the contract of employment.
It must be borne in mind in this regard that, according to settled case-law, the necessity for uniform application and accordingly for uniform interpretation of a Community measure makes it impossible to consider one version of the text in isolation, but requires that it be interpreted on the basis of both the real intention of its author and the aim he seeks to achieve, in the light, in particular, of the versionsin all languages (see, inter alia, Case 29/69 Stauder [1969] ECR 419, paragraph 3; Case 55/87 Moksel [1988] ECR 3845, paragraph 15; and Case C-‘268/99 Jany and Others [2001] ECR I-8615, paragraph 47).
With regard to the directive, it should be pointed out that, in its versions in languages other than German, the term used in the place of – either covers at the same time both of the events referred to by the Arbeitsgericht or refers rather to the expression by the employer of his intention to terminate the contract of employment.
Next, it must be noted that Article 2(1) of the directive imposes an obligation on the employer to begin consultations with the workers- representatives in good time in the case where he -is contemplating collective redundancies-. Article 3(1) requires the employer to notify the competent public authority of -any projected collective redundancies-.
The case in which the employer -is contemplating- collective redundancies and has drawn up a -project- to that end corresponds to a situation in which no decision has yet been taken. By contrast, the notification to a worker that his or her contract of employment has been terminated is the expression of a decision to sever the employment relationship, and the actual cessation of that relationship on the expiry of the period of notice is no more than the effect of that decision.
Thus, the terms used by the Community legislature indicate that the obligations to consult and to notify arise prior to any decision by the employer to terminate contracts of employment.
Finally, this interpretation is confirmed, in regard to the procedure for consultation of workers-representatives, by the purpose of the directive, as set out in Article 2(2), which is to avoid terminations of contracts of employment or to reduce the number of such terminations. The achievement of that purpose would be jeopardised if the consultation of workers- representatives were to be subsequent to the employer-s decision.
The answer to the first question must therefore be that Articles 2 to 4 of the directive must be construed as meaning that the event constituting redundancy consists in the declaration by an employer of his intention to terminate the contract of employment.
The second question
By its second question, the Arbeitsgericht is seeking to ascertain whether an employer is entitled to carry out collective redundancies before the end of the consultation procedure set out in Article 2 of the directive and of the notification procedure set out in Articles 3 and 4 of the directive.
It follows already from the answer to the first question that an employer cannot terminate contracts of employment before he has engaged in the two procedures in question.
With regard to the consultation procedure, this is provided for, within the terms of Article 2(1) of the directive, -with a view to reaching an agreement-. According to Article 2(2), this procedure must, -at least, cover ways and means of avoiding collective redundancies or reducing the number of workers affected, and of mitigating the consequences by recourse to accompanying social measures-
It thus appears that Article 2 of the directive imposes an obligation to negotiate.
The effectiveness of such an obligation would be compromised if an employer was entitled to terminate contracts of employment during the course of the procedure or even at the beginning thereof. It would be significantly more difficult for workers- representatives to achieve the withdrawal of a decision that has been taken than to secure the abandonment of a decision that is being contemplated.
A contract of employment may therefore be terminated only after the conclusion of the consultation procedure, that is to say, after the employer has complied with the obligations set out in Article 2 of the directive.
So far as concerns the procedure for notifying the competent public authority, it must be remembered that, in accordance with Article 3 of the directive, the employer is required to notify the competent authority of -any projected collective redundancies-.
Under Article 4(2) of the directive, notification has the purpose of allowing the competent authority to seek solutions to the problems raised by the projected collective redundancies.
Article 4(2) states that the competent authority must use the period provided for in Article 4(1) for the purpose of seeking such solutions.
The period in question is one of at least 30 days following notification. Under the conditions laid down in the second subparagraph of Article 4(1) and in Article 4(3) of the directive, Member States may grant the competent public authority the power to reduce or extend that period.
Under the first subparagraph of Article 4(1) of the directive, collective redundancies, that is to say, termination of the contracts of employment, may take effect only after expiry of the period applicable.
That period consequently corresponds to the minimum period which must be available to the competent authority for the purpose of seeking solutions.
By setting out an express proviso in regard to provisions governing individual rights with regard to notice of dismissal, the first subparagraph of Article 4(1) of the directive is necessarily contemplating a situation in which contracts of employment have already been terminated, thereby setting such a period in motion. The proviso in regard to the expiry of a period of notice differing from that provided for by the directive would make no sense if no period of notice had started to run.
In those circumstances, it must be held that Articles 3 and 4 of the directive do not preclude termination of the contracts of employment during the course of the procedure which they institute, on condition that such termination occurs after the projected collective redundancies have been notified to the competent public authority.
The answer to the second question must therefore be that an employer is entitled to carry out collective redundancies after the conclusion of the consultation procedure provided for in Article 2 of the directive and after notification of the projected collective redundancies as provided for in Articles 3 and 4 of that directive.
Athinaiiki Chartopoiia
[2007] IRLR 284
JUDGMENT OF THE COURT (First Chamber)
“By its question, the national court refers to the judgment of the Efetio Thrakis, according to which the production unit at issue in the main proceedings was not independent from the company, and asks essentially whether such a production unit comes within the concept of ‘establishment’ for the purposes of the application of Directive 98/59.
According to the Court’s case-law, the concept of ‘establishment’, which is not defined in that directive, is a term of Community law and cannot be defined by reference to the laws of the Member States (Case C-449/93 Rockfon [1995] ECR I-4291, paragraphs 23 and 25). It must, accordingly, be interpreted in an autonomous and uniform manner in the Community legal order.
The Court has also held that the terms used in the various language versions of Directive 98/59 to refer to the concept of ‘establishment’ are somewhat different and have different connotations, signifying, according to the version in question, establishment, undertaking, work centre, local unit or place of work (see Rockfon, paragraphs 26 and 27).
In the light of those considerations and the purpose of that directive which, as evidenced by the second recital in the preamble thereto, seeks inter alia to promote greater protection for workers in the event of collective redundancies, the Court has interpreted the concept of ‘establishment’ in Directive 98/59, in particular in Article 1(1)(a), as designating, depending on the circumstances, the unit to which the workers made redundant are assigned to carry out their duties (Rockfon, paragraphs 31 and 32, and case-law cited).
In so doing, the Court has defined the term ‘establishment’ very broadly, in order to limit as far as possible cases of collective redundancies which are not subject to Directive 98/59 because of the legal definition of that term at national level (see, inter alia, Joined Cases C-187/05 to C-190/05 Agorastoudis and Others [2006] ECR I-0000, paragraph 37). However, given the general nature of that definition, it cannot by itself be decisive for the appraisal of the specific circumstances of the case at issue in the main proceedings.
Thus, for the purposes of the application of Directive 98/59, an ‘establishment’, in the context of an undertaking, may consist of a distinct entity, having a certain degree of permanence and stability, which is assigned to perform one or more given tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks.
Given that the objective pursued by Directive 98/59 concerns, in particular, the socio’economic effects which collective redundancies may have in a given local context and social environment, 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’.
It is, moreover, in this spirit that the Court has held 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 (Rockfon, paragraph 34, and point 2 of the operative part). Nor must there be a geographical separation from the other units and facilities of the undertaking.
In the light of those considerations, the Court finds, first of all, that the fact that Greek Law 1387/1983 uses the terms ‘establishment’ and ‘operating unit’ interchangeably is not in itself contrary to Directive 98/59, provided that the interpretation given by the Court of the concept of ‘establishment’ is followed and the use of two terms cannot lead to the exclusion of categories of workers from the protection intended by that directive.
Next, regarding the nature of the production unit at issue in the main proceedings, the information in the case-file indicates that that unit is one of three separate production units held by the company; it employs 420 workers; it has distinct equipment and a specialised workforce; its operation is not affected by that of the other units; and it has a chief production officer who ensures that the work is carried out properly, is responsible for supervision of the entire operation of the unit’s installations and ensures that technical questions are solved.
Those factors clearly give such a unit the air of an ‘establishment’ for the purposes of the application of Directive 98/59, in accordance with the considerations set out by the Court in paragraphs 27 to 29 of the present judgment, and bring the unit in question within the scope of this Community concept. The fact that decisions concerning the operating expenditure of each of those units, the purchase of materials and the costing of products are taken at the company’s headquarters, where a joint accounts office is set up, is irrelevant in this regard.
In order to give to give an answer that will be of use to the national court, the Court notes further that, as evidenced by the case-file, the Efetio Thrakis held that since the production unit at issue in the main proceedings was not independent from the company, it was not an ‘establishment’ and therefore did not come within the scope of the exception provided for in Article 5(5) of Law 1387/1983, which transposes into national law the derogation laid down in Article 4(4) of Directive 98/59.
In other words, according to that court’s view of the matter, if that production unit were autonomous and constituted an ‘establishment’, the abovementioned derogation would apply because the termination of that unit’s activities was solely of the employer’s own volition.
That position is part of the same approach in the national case-law which was behind the judgment in Agorastoudis and Others, and has no foundation in Directive 98/59. It is therefore necessary to clarify on this point, as rightly pointed out by the Commission of the European Communities, that, even if the unit in question in the main proceedings were found to be autonomous and did constitute an ‘establishment’, the abovementioned derogation would not apply.
For the same reasons as set out in paragraphs 25 to 45 of Agorastoudis and Others, the derogation in question is applicable solely when the termination of the activities of an undertaking or an operating unit follows a judicial decision. In all other cases, and particularly when the termination of the establishment’s activities is solely of the employer’s volition, the employer has the obligation to pursue consultations with the workers during a supplementary period before the competent pubic authority.
Lastly, the Court notes that, in the context of proceedings before the Court, the issue of the compatibility of the intervention by the national public authorities, namely the prefect or the Minister for Labour, as provided for in Article 5(3) of Law 1387/1983, with Directive 98/59 and Article 43 EC has been raised with some insistence. That question was not, however, the subject of the present reference for a preliminary ruling.
In the light of the foregoing considerations, the answer to the question referred must be that Directive 98/59, in particular Article 1(1)(a), is to be interpreted as meaning that a production unit such as that at issue in the main proceedings comes within the concept of ‘establishment’ for the purposes of the application of that directive.
Akavan Erityisalojen Keskusliitto AEK & Ors
[2009] IRLR 944 [2010] ICR 444, [2010] 1 CMLR 11
“The first question
By its first question, the referring court seeks clarification of the meaning of the expression ‘is contemplating collective redundancies’, in Article 2(1) of Directive 98/59, in order to determine the time at which the obligation to hold consultations, laid down in Article 2, starts. The court asks, in that regard, whether that obligation arises when it is established that strategic decisions or changes in the business of the undertaking will make collective redundancies of employees necessary, or when the adoption of such decisions or changes, as a result of which it is to be expected that such redundancies will become necessary, are contemplated.
First, it is to be noted that the present case relates to economic and commercial decisions which might have repercussions on the employment of a number of workers within an undertaking, and not to decisions which are directly concerned with terminating specific employment relationships.
In that regard, it must be recalled that, as is clear from the wording of Articles 2(1) and 3(1) of Directive 98/59, the obligations of consultation and notification imposed on the employer come into being prior to the employer’s decision to terminate employment contracts (see, to that effect, Case C-188/03 Junk [2005] ECR I-885, paragraphs 36 and 37). In such a case, there is still a possibility of avoiding or at least reducing collective redundancies, or of mitigating the consequences.
Under Article 2(1) of Directive 98/59, the employer has the obligation to start consultations with the workers’ representatives in good time if he ‘is contemplating collective redundancies’. As stated by the Advocate General in points 48 and 49 of his Opinion, it is clear from comparison of various language versions of that provision that the Community legislature envisaged that the obligation at issue to hold consultations would arise in connection with the existence of an intention on the part of the employer to make collective redundancies.
The references in Articles 3 and 4 of Directive 98/59 to ‘projected’ collective redundancies confirm that the existence of such an intention is the factor which triggers the obligations laid down by that directive, in particular by Article 2.
It follows that the obligation to hold consultations laid down in Article 2 of Directive 98/59 is deemed to arise where the employer is contemplating collective redundancies or is drawing up a plan for collective redundancies (see, to that effect, Case 284/83 Dansk Metalarbejderforbund and Specialarbejderforbundet i Danmark [1985] ECR 553, paragraph 17).
It must however be added that, as is clear from the actual wording, the obligations laid down by Directive 98/59, in particular the obligation to hold consultations laid down in Article 2, are also triggered in situations where the prospect of collective redundancies is not directly the choice of the employer.
Under Article 2(4) of that directive, the employer is responsible for compliance with the information and consultation requirements stemming from that directive, even if the decision on collective redundancies is made not by the employer, but by the undertaking controlling the employer, and even though the employer may not have been immediately and properly informed of that decision.
Against an economic background marked by the increasing presence of groups of undertakings, that provision serves to ensure, where one undertaking is controlled by another, that the purpose of Directive 98/59, which, as is stated in recital 2 of its preamble, seeks to promote greater protection for workers in the event of collective redundancies, is actually achieved (Case C-270/05 Athinaïki Chartopoiïa [2007] ECR I-1499, paragraph 25).
Moreover, as the United Kingdom Government rightly observes, a premature triggering of the obligation to hold consultations could lead to results contrary to the purpose of Directive 98/59, such as restricting the flexibility available to undertakings when restructuring, creating heavier administrative burdens and causing unnecessary uncertainty for workers about the safety of their jobs.
Lastly, the raison d’être and effectiveness of consultations with the workers’ representatives presuppose that the factors to be taken into account in the course of those consultations have been determined, given that it is impossible to undertake consultations in a manner which is appropriate and consistent with their objectives when there has been no definition of the factors which are of relevance with regard to the collective redundancies contemplated. Those objectives are, under Article 2(2) of Directive 98/59, to avoid termination of employment contracts or to reduce the number of workers affected, and to mitigate the consequences (see Junk, paragraph 38). However, where a decision deemed likely to lead to collective redundancies is merely contemplated and where, accordingly, such collective redundancies are only a probability and the relevant factors for the consultations are not known, those objectives cannot be achieved.
On the other hand, it is clear that to draw a link between the requirement to hold consultations arising under Article 2 of Directive 98/59 and the adoption of a strategic or commercial decision which makes the collective redundancies of workers necessary may deprive that requirement, in part, of its effectiveness. As is clear from the first subparagraph of that Article 2(2), the consultations must cover, inter alia, the possibility of avoiding or reducing the collective redundancies contemplated. A consultation which began when a decision making such collective redundancies necessary had already been taken could not usefully involve any examination of conceivable alternatives with the aim of avoiding them.
It must therefore be held that, in circumstances such as those of the case in the main proceedings, the consultation procedure must be started by the employer once a strategic or commercial decision compelling him to contemplate or to plan for collective redundancies has been taken.
In those circumstances, the answer to be given to the first question referred is that Article 2(1) of Directive 98/59 must be interpreted to mean that the adoption, within a group of undertakings, of strategic decisions or of changes in activities which compel the employer to contemplate or to plan for collective redundancies gives rise to an obligation on that employer to consult with workers’ representatives.
The second question
By its second question, the referring court asks, in essence, if whether the obligation has arisen for the employer to start consultations on collective redundancies contemplated depends on whether the employer is already able to supply to the workers’ representatives all the information required in Article 2(3)(b) of Directive 98/59.
The wording of that provision states clearly that the information specified must be supplied by the employer ‘in good time during the course of the consultations’, in order to ‘enable workers’ representatives to make constructive proposals’.
It follows from that provision that that information can be provided during the consultations, and not necessarily at the time when they start.
As stated by the Advocate General in points 64 and 65 of his Opinion, the logic of that provision is that the employer is to supply to the workers’ representatives the relevant information throughout the course of the consultations. Flexibility is essential, given, first, that that information may become available only at various stages in the consultation process, which implies that the employer both can and must add to the information supplied in the course of that process. Secondly, the purpose of the employer being under that obligation is to enable the workers’ representatives to participate in the consultation process as fully and effectively as possible, and, to achieve that, any new relevant information must be supplied up to the end of the process.
It follows that the time at which consultations are to start cannot be dependent on whether the employer is already able to supply to the workers’ representatives all the necessary information referred to in Article 2(3)(b) of Directive 98/59.
The answer to be given to the second question referred is that whether the obligation has arisen for the employer to start consultations on the collective redundancies contemplated does not depend on whether the employer is already able to supply to the workers’ representatives all the information required in Article 2(3)(b) of Directive 98/59.
The third and fourth questions
By its third and fourth questions, which can be answered together, the referring court seeks to know, in essence, first, whether Article 2(1) of Directive 98/59, read in conjunction with the first paragraph of Article 2(4) of that directive, should be interpreted to mean that, in the case of a group of undertakings consisting of a parent company and one or more subsidiaries, the obligation to consult with workers’ representatives arises when either the employer or the parent company which controls the employer is contemplating collective redundancies and, secondly, in order for an obligation to start consultations to arise must the subsidiary within which collective redundancies may be made be identified.
In that regard, it is clear that, under Article 2(1) and (3) and Article 3(1) and (2) of Directive 98/59, the only party on whom the obligations to inform, consult and notify are imposed is the employer, in other words a natural or legal person who stands in an employment relationship with the workers who may be made redundant.
An undertaking which controls the employer, even if it can take decisions which are binding on the latter, does not have the status of employer.
As stated by the Commission of the European Communities, first, how the management of a group of undertakings is organised is an internal matter and, secondly, it is not the purpose of Directive 98/59, any more than it was of Directive 75/129, to restrict the freedom of such a group to organise their activities in the way which they think best suits their needs (see, to that effect, as regards Directive 75/129, Case C-449/93 Rockfon [1995] ECR I-4291, paragraph 21).
Directive 98/59, like Directive 75/129, carries out only a partial harmonisation of the rules for the protection of workers in the event of collective redundancies. It is therefore not designed to bring about full harmonisation of national systems of worker representation in undertakings (see, concerning Directive 75/129, Case C-383/92 Commission v United Kingdom [1994] ECR I-2479, paragraph 25 and case-law there cited).
In the context of that partial harmonisation, as stated by the appellants in the main proceedings, the Community legislature intended, by adopting Directive 92/56 and then Directive 98/59, to fill a gap in its earlier legislation and to add clarification concerning the obligations of employers who are part of a group of undertakings. Accordingly, Article 2(4) of Directive 98/59 provides that the obligation to hold consultations applies to the employer irrespective of whether the decision regarding collective redundancies is being taken by the employer or by an undertaking controlling that employer.
Consequently, Article 2(1) and the first subparagraph of Article 2(4) of Directive 98/59 are to be interpreted to the effect that, under those provisions, irrespective of whether collective redundancies are contemplated or projected as a result of a decision of the undertaking which employs the workers concerned or a decision of its parent company, it is always the former which is obliged, as the employer, to start consultations with the representatives of its workers.
As regards the time at which that obligation arises, it is evident, as observed by the Finnish Government, that consultations with the workers’ representatives can be started only if it is known in which undertaking collective redundancies may be made. Where the parent company of a group of undertakings adopts decisions likely to have repercussions on the jobs of workers within that group, it is for the subsidiary whose employees may be affected by redundancies, in its capacity as their employer, to start consultations with the workers’ representatives. It is therefore not possible to start such consultations until such time as that subsidiary has been identified.
In addition, with regard to the intended objectives of the consultations, under Article 2(2) of Directive 98/59, those consultations are, at least, to cover ways and means of avoiding collective redundancies or reducing the number of workers affected, and of mitigating the consequences by recourse to accompanying social measures aimed, inter alia, at aid for redeploying or retraining workers made redundant. If a consultation on those matters is to have any meaning, the subsidiary whose employees will be affected by the contemplated collective redundancies must be known.
In those circumstances, the answer to be given to the third and fourth questions referred is that Article 2(1) of Directive 98/59, read in conjunction with the first subparagraph of Article 2(4) of that directive, must be interpreted to mean that, in the case of a group of undertakings consisting of a parent company and one or more subsidiaries, the obligation to hold consultations with the workers’ representatives falls on the subsidiary which has the status of employer only once that subsidiary, within which collective redundancies may be made, has been identified.
The fifth and sixth questions
By its fifth and sixth questions, the referring court seeks clarification on when the consultation procedure, laid down in Article 2(1) of Directive 98/59, is to be concluded, in the case where, when there is a group of undertakings consisting of a parent company and one or more subsidiaries, the decision which either may or must lead to collective redundancies is taken within the parent company.
As explained in relation to the answer given to the third and fourth questions, the obligation to hold consultations laid down in Article 2(1) of Directive 98/59 is binding solely on the employer.
There is no provision in that directive which can be interpreted to the effect that it may impose such an obligation on the parent company.
It follows that it is always for the subsidiary, as the employer, to undertake consultations with the representatives of the workers who may be affected by the collective redundancies contemplated and, if necessary, itself to bear the consequences of failure to fulfil the obligation to hold consultations if it has not been immediately and properly informed of a decision by its parent company making such redundancies necessary.
As regards the conclusion of the consultation procedure, the Court has previously ruled that, where Directive 98/59 is applicable, an employment contract can be terminated by the employer only after that procedure is concluded, in other words after the employer has fulfilled the obligations set out in Article 2 of that directive (see Junk, paragraph 45). It follows that the consultation procedure must be completed before any decision on the termination of employees’ contracts is taken.
In the context of a group of undertakings such as that in question in the main proceedings, it follows from that case-law that a decision by the parent company which has the direct effect of compelling one of its subsidiaries to terminate the contracts of employees affected by the collective redundancies can be taken only on the conclusion of the consultation procedure within that subsidiary, failing which the subsidiary, as the employer, is liable for the consequences of failure to comply with that procedure.
In light of the foregoing, the answer to be given to the fifth and sixth questions referred is that Article 2(1) of Directive 98/59, read in conjunction with Article 2(4) of that directive, must be interpreted to mean that, in the case of a group of undertakings, the consultation procedure must be concluded by the subsidiary affected by the collective redundancies before that subsidiary, on the direct instructions of its parent company or otherwise, terminates the contracts of the employees who are to be affected by those redundancies.
Ex Parte Price
[1994] IRLR 72
Glidewell LJ
‘ and ‘Another way of putting the point more shortly is that fair consultation involves giving the body consulted a fair and proper opportunity to understand fully the matters about which it is being consulted, and to express its views on those subjects, with the consultor thereafter considering those views properly and genuinely.’
Scotch Premier Meat Ltd v Burns & Others
[2000] UKEAT 1151_99_2804
LORD JOHNSTON:
“This is an appeal at the instance of the employer in a test case arising out of the closure of the appellants’ slaughterhouse in Edinburgh, against a decision of the Employment Tribunal which held that the employees who were made redundant, both voluntarily and compulsorily, were entitled to protective awards under and in terms of section 188 and 189 of the Trade Unions and Labour Relations (Consolidation) Act 1992 (TULRA).
The Tribunal set out the factual history in some detail but the problem started with the withdrawal from the appellants of a large regular order from the supermarket chain, Asda in January 1998. The executives of the appellants reviewed a number of options and at a board meeting minuted on 15 April, an option was determined upon which involved the sale of the business as a going concern or as a development site, with potentially 155 redundancies. It was acce
The substance of the Tribunal’s decision on this point, is to be found on page 28 letter C as follows:-
“In terms of the case law, on 15 April SPM had reached a decision, though not necessarily a final one, and certainly the thought of redundancy was more than a remote possibility (NUPE v General Cleaning Contractors [1976] IRLR 362 (IT)); it was beyond diagnosis of the problem and at the later stage of a specific proposal having been formulated (Hough and APEX v Leyland DAF Ltd [1991] IRLR 194 (EAT)); its state of mind was directed to a planned or proposed course of events and it had a view as to how many were to be dismissed and approximately when it was to take place, much more than mere contemplation (Association of Patternmakers and Allied Craftsment v Kirvin Ltd [1978] IRLR 318 (EAT)), USDAW v Leancut Bacon Ltd [1981] IRLR 295 (EAT)); it was at least a potential redundancy situation, if not an actual one, SPM could identify the particular employees concerned, and consultation might have resulted in new ideas being ventilated, if not to avoid the redundancy situation altogether, to lead to lesser numbers being made redundant than was originally thought necessary, or to find alternative work during the period of consultation (Spillers French (Holdings) Ltd v USDAW [1980] ICR 31 (EAT)); this was the only opportunity for employees through representatives to be able to seek to influence the overall decision and put forward other ideas and other considerations, even if SPM might have thought that consultation was really going to achieve nothing (Sovereign Distribution Services Ltd v TGWU [1990] ICR 31 (EAT)); the information identified in Article 2.3 was available and SPM could identify the employees likely to be affected (Griffin v South West Water Services Ltd [1995] IRLR 15 (ChD)).
Although this was not the only route available to SPM, once it determined on a plan of action which had 2 alternative scenarios, 1 of which included dismissals, then that constituted a proposal within the meaning of section 188.
Taking all that evidence together, with the plain meaning of the words, even using the more restrictive definition of ‘propose’ adopted in the earlier cases on the interpretation of section 188, the Tribunal was satisfied that by Wednesday 15 April (and certainly by Friday 24, Sunday 26 or at latest Tuesday 28, April) SPM proposed to dismiss as redundant 100 or more employees at one establishment (Gorgie) within a period of 90 days or less.
In answer to the question posed in Hough, ‘When did SPM propose to dismiss the Gorgie employees as redundant?’, the Tribunal found that this occurred on 15 April, or at least 24, 26 or 28 April.
So even using the more restrictive definition of ‘propose’ adopted in those earlier cases, in this case the Tribunal found that by 15 April 1998, or at the latest 24, 26 or 28 April, SPM was proposing to dismiss 100 or more employees.”
In his submissions, Mr Truscott went through the cases that are set out in the passage of the Tribunal’s decision we have just rehearsed and submitted that the evidence properly understood, could not support the view that any time up to the date when the dismissal were effected, there was on the table or in the mind of the employer, a proposal to dismiss 20 or more employees as redundant. He based his argument principally upon the vagueness of the options being considered but more importantly so long as the sale of the business as a going concern was being considered, at its highest, redundancies were merely being contemplated and not proposed. He put it this way by reason of the fact that in terms of the European Directive the terms of which the Tribunal set out, the word “contemplate” is used rather than “propose”. Mr Truscott freely conceded that if “contemplation” was the correct approach, then he had no point on this part of the case, since that definition was plainly satisfied upon the evidence and the date of 15 April could be used as the pointer. We shall return to the European issue in due course.
Mrs Cullen, appearing for the respondents, submitted that upon the evidence, in reality there was a clear proposal to make employees redundant not later than 15 April, since in the absence of the Asda contract, it could not realistically be considered that the business was sellable as a going concern.
We accept the criticism of Mr Truscott that the Tribunal appeared to have opted for a number of dates before settling for 28 April as the triggering point but we consider they were entitled to do that in a factual context. What we have to determine, however, is whether the Tribunal was entitled to hold that by that date there was a proposal to dismiss as redundant at least 20 employees.
We consider this to be essentially a question of fact given that the word “propose” connotes an intention in the mind of the employer. Upon the evidence we consider the Tribunal was more than entitled to conclude that, realistically, by the board meeting on 15 April, the board were embarked upon a closure policy relating to redundancies which meets the general notion of a proposal. We will, accordingly, accept its reasoning and not interfere with the findings of the Tribunal in this respect.
In these circumstances it is not necessary for us to determine the question as to whether the phrase “proposing to dismiss” can or should be construed to equiperate to the word “contemplate” in the Directive to which we have already referred, the terms of which the Tribunal set out ad longum.
In this respect the decision of the Tribunal is as follows:-
“Construing section 188 under European Community law
If the Tribunal was wrong in interpreting those facts as falling within the description of ‘proposing to dismiss’ in section 188 as construed by the UK courts, it considered that (a) it was bound to construe section 188 and those words in light of the Directive and relevant EEC law; (b) that resulted in a wider meaning of ‘contemplating collective redundancies’ being given to those words, ie that workers’ representatives must be informed and consulted with regard to the details of projected collective redundancies and the possibility of reducing the numbers or effects of such redundancies, and are informed, consulted and in a position to intervene (Commission v UK [1994] IRLR 412 (ECJ)), and that consultation is to take place at the stage when it could be about ways and means of avoiding collective redundancies or reducing the number of workers affected, and mitigating the consequences (Dansk Metalarbejderforbund and Specialarbejder-forbundet i Danmark v H Neilsen & Søn, Maskinfabrick A/S (in liquidation) 284/83 [1985] ECR 553, [1986] 1 CMLR 91 (ECJ)); and (c) the evidence certainly established that by 15 April (and at least by 24 April) SPM was contemplating collective redundancies. Consultation after those dates would not have been able to achieve the objectives of avoiding collective redundancies or putting the employee representatives in a position to intervene realistically, as turned out to be the case when consultation was eventually started on 5 May 2000.
In relation to (a), while Griffin was decided before section 188 was amended by the 1995 Regulations, the Tribunal was satisfied that in accordance with the doctrine of indirect effect and Van Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891 (ECJ) that part of Article 2 is now unconditional and sufficiently precise so as to be capable of direct enforcement, so that the Tribunal is under a duty to give full effect to it without waiting for a higher court to rule on it (and see also Harvey E [2452-3, 2477-80]).
Within that legal framework the Tribunal was unable to accept the submission for SPM that such a construction is incompatible with the plain words of the statute.”
We recognise that a matter of general law, the national courts are obliged to construe the national legislation emanating from or arising out of the European Directive so far as possible to be consistent with and compatible with the terms of the original directive, (Webb v EMO Air Cargo (UK) Ltd [1993] ICR 175 per Lord Keith of Kinkel at page 187 letter E).
It has to however been noted, that his Lordship adds the rider that the domestic law must be capable of an interpretation consistent with the Directive, even if it is capable of more than one interpretation. What therefore the case does not determine is whether the Directive can be given effective if the domestic law cannot be construed in any way to be compatible with the terms of the Directive.
As we have already indicated, we do not have to determine this point but in case the matter goes further, it is necessary that we express a view.
We have some difficulty with the reasoning of the Tribunal in this respect since to our minds the word “contemplate” by definition, is far wider than the more precise word “propose”. It seems to us by definition that “contemplation” enjoins a large number of options or at least more than one, while “propose” enjoins a specific proposal. We therefore incline to the view that it is extremely difficult if not impossible to construe “propose” as wide enough to cover “contemplation”, although we recognise that upon one view, “proposal” indicates a state of mind and so does “contemplation”. What concerns us is whether the less can include the greater while the opposite is certainly the case.
In these circumstances we expressly reserve our position in this matter, save again to express the view that we have some difficulty in applying the Webb doctrine to the two sets of terminology. This is perhaps all the more reason for taking a fairly broad view of the facts as the Tribunal have done and which we have supported in determining that there was a proposal to dismiss.”
USDAW and Wilson
[2015] EUECJ C-80/14 (30 April 2015)
[2015] 3 CMLR 32, [2016] CEC 59, [2015] WLR(D) 189, [2015] EUECJ C-80/14, [2015] ICR 675, EU:C:2015:291, [2015] IRLR 577
Judgment
1 This request for a preliminary ruling concerns the interpretation of Article 1(1)(a) of Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies (OJ 1998 L 225, p. 16).
2 The request has been made in proceedings between the Union of Shop, Distributive and Allied Workers (USDAW) and Mrs Wilson, on the one hand, and WW Realisation 1 Ltd, in liquidation (‘Woolworths’), on the other, and between USDAW, on the one hand, and Ethel Austin Ltd (‘Ethel Austin’) and the Secretary of State for Business, Innovation and Skills (‘the Secretary of State for Business’), on the other, concerning the lawfulness of the dismissals made by Woolworths and Ethel Austin. The Secretary of State for Business was joined as a party to the main proceedings on the basis that, if a ‘protective award’ is made against Woolworths or Ethel Austin but they are unable to satisfy that award, he will be required to pay to those employees who make an application the amount to which, in his opinion, the employee is entitled in respect of that debt, up to a statutory maximum.
Legal context
EU law
3 According to recital 1 in the preamble to Directive 98/59, that directive consolidated Council Directive 75/129/EEC of 17 February 1975 on the approximation of the laws of the Member States relating to collective redundancies (OJ 1975 L 48, p. 29).
4 As set out in recital 2 of Directive 98/59, it is important that greater protection should be afforded to workers in the event of collective redundancies while taking into account the need for balanced economic and social development within the European Union.
5 Recitals 3 and 4 of that directive state:
‘(3) Whereas, despite increasing convergence, differences still remain between the provisions in force in the Member States concerning the practical arrangements and procedures for such redundancies and the measures designed to alleviate the consequences of redundancy for workers;
(4) Whereas these differences can have a direct effect on the functioning of the internal market’.
6 Recital 7 of the directive emphasises the need to promote the approximation of the laws of the Member States relating to collective redundancies.
7 Article 1 of the directive, entitled ‘Definitions and scope’, provides:
‘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;
…
For the purpose of calculating the number of redundancies provided for in the first subparagraph of point (a), terminations of an employment contract which occur on the employer’s initiative for one or more reasons not related to the individual workers concerned shall be assimilated to redundancies, provided that there are at least five redundancies.
2. This Directive shall not apply to:
(a) collective redundancies effected under contracts of employment concluded for limited periods of time or for specific tasks except where such redundancies take place prior to the date of expiry or the completion of such contracts;
…’
8 Under Article 2 of the directive:
‘1. Where an employer is contemplating collective redundancies, he shall begin consultations with the workers’ representatives in good time with a view to reaching an agreement.
2. These consultations shall, at least, cover ways and means of avoiding collective redundancies or reducing the number of workers affected, and of mitigating the consequences by recourse to accompanying social measures aimed, inter alia, at aid for redeploying or retraining workers made redundant.
…
3. To enable workers’ representatives to make constructive proposals, the employers shall in good time during the course of the consultations:
(a) supply them with all relevant information and
(b) in any event notify them in writing of:
(i) the reasons for the projected redundancies;
(ii) the number and categories of workers to be made redundant;
(iii) the number and categories of workers normally employed;
(iv) the period over which the projected redundancies are to be effected;
(v) the criteria proposed for the selection of the workers to be made redundant in so far as national legislation and/or practice confers the power therefor upon the employer;
(vi) the method for calculating any redundancy payments other than those arising out of national legislation and/or practice.
The employer shall forward to the competent public authority a copy of, at least, the elements of the written communication which are provided for in the first subparagraph, point (b), subpoints (i) to (v).
…’
9 Article 3(1) of the directive provides:
‘Employers shall notify the competent public authority in writing of any projected collective redundancies.
…
This notification shall contain all relevant information concerning the projected collective redundancies and the consultations with workers’ representatives provided for in Article 2, and particularly the reasons for the redundancies, the number of workers to be made redundant, the number of workers normally employed and the period over which the redundancies are to be effected.’
10 Article 4(1) and (2) of the directive is worded as follows:
‘1. Projected collective redundancies notified to the competent public authority shall take effect not earlier than 30 days after the notification referred to in Article 3(1) without prejudice to any provisions governing individual rights with regard to notice of dismissal.
Member States may grant the competent public authority the power to reduce the period provided for in the preceding subparagraph.
2. The period provided for in paragraph 1 shall be used by the competent public authority to seek solutions to the problems raised by the projected collective redundancies.’
11 Article 5 of the directive provides:
‘This Directive shall not affect the right of Member States to apply or to introduce laws, regulations or administrative provisions which are more favourable to workers or to promote or to allow the application of collective agreements more favourable to workers.’
United Kingdom law
12 The Trade Union and Labour Relations (Consolidation) Act 1992 (‘TULRCA’) is intended to implement the United Kingdom’s obligations under Directive 98/59.
13 Section 188(1) of the TULRCA is worded as follows:
‘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.’
14 Under section 189(1) of the TULRCA, where an employer fails to comply inter alia with one of the requirements relating to that consultation, a complaint may be presented to an employment tribunal on that ground by the relevant trade union in the case of failure relating to representatives of a trade union, or, in any other case, by any of the affected employees or by any of the employees who have been dismissed as redundant. If the complaint is well founded, the payment of an amount by way of compensation, a ‘protective award’, may be ordered under section 189(2) of the TULRCA.
15 Section 189(3) of the TULRCA states that a protective award is an award in respect of employees who have been dismissed as redundant or whom it is proposed to dismiss as redundant and in respect of whose dismissal or proposed dismissal, the employer has failed to comply, inter alia, with one of the requirements relating to consultation.
16 Under section 190(1) of the TULRCA, where a protective award is made, every employee of a description to which the award relates is, in principle, entitled to be paid remuneration by his employer for the protected period.
17 Section 192(1) of the TULRCA provides that an employee of a description to which a protective award relates may present a complaint to an employment tribunal on the ground that his employer has failed, wholly or in part, to pay him remuneration under the award. Where the complaint is well founded, the tribunal is to order the employer to pay him the amount of remuneration due, in accordance with section 192(3) of the TULRCA.
18 Part XII of the Employment Rights Act 1996 (‘ERA’) is intended to implement the United Kingdom’s obligations under Directive 2008/94/EC of the European Parliament and of the Council of 22 October 2008 on the protection of employees in the event of the insolvency of their employer (OJ 2008 L 283, p. 36).
19 Section 182 of the ERA provides:
‘If, on an application made to him in writing by an employee, the Secretary of State is satisfied that
(a) the employee’s employer has become insolvent,
(b) the employee’s employment has been terminated, and
(c) on the appropriate date the employee was entitled to be paid the whole or part of any debt to which [Part XII of the ERA] applies,
the Secretary of State shall, subject to section 186, pay the employee out of the National Insurance Fund the amount to which, in the opinion of the Secretary of State, the employee is entitled in respect of the debt.’
20 Section 183 of the ERA sets out the circumstances in which an employer has become insolvent.
21 Under section 184(1) of the ERA, the debts to which Part XII applies include any arrears of pay in respect of one or more weeks, up to a maximum of eight.
22 Section 184(2) of the ERA specifies that remuneration under a protective award under section 189 of the TULRCA is to be treated as arrears of pay.
23 Section 188 of the ERA provides that a person who has applied for a payment under section 182 of the ERA may present a complaint to an employment tribunal in the event that the Secretary of State for Business fails to make any such payment, or that the payment made is less than the amount which should have been paid. Where the tribunal finds that the Secretary of State for Business ought to make a payment under section 182, it is to make a declaration to that effect and determine the amount of the payment to be made.
The dispute in the main proceedings and the questions referred for a preliminary ruling
24 Woolworths and Ethel Austin were companies active in the high street retail sector throughout the United Kingdom, operating chains of stores under the trade names ‘Woolworths’ and ‘Ethel Austin’ respectively. They became insolvent and went into administration, which resulted in the dismissal on grounds of redundancy of thousands of employees across the United Kingdom.
25 Against that background, USDAW, in its capacity as a trade union organisation, brought claims before the Liverpool Employment Tribunal and the London Central Employment Tribunal against those two companies on behalf of several thousand of its members, former employees of those companies, who had been dismissed on grounds of redundancy.
26 USDAW has over 430 000 members across the United Kingdom, who work in a wide variety of occupations.
27 Mrs Wilson was employed at one of the stores in the ‘Woolworths’ chain in Saint Ives (United Kingdom), and was the USDAW representative on the national employee forum (known as the ‘Colleague Circle’) created by Woolworths to deal with various issues, including consultations prior to collective redundancies.
28 USDAW and Mrs Wilson sought protective awards against the employers in favour of the dismissed employees on the ground that, prior to the adoption of the redundancy programmes, the consultation procedure provided for in the TULRCA had not been followed.
29 Under the relevant provisions of the ERA, if protective awards were made against Woolworths or Ethel Austin but they were not in a position to satisfy them, an employee could require the Secretary of State for Business to pay, and he would be required to pay that award, up to the statutory maximum, as arrears of pay. If the Secretary of State were to fail to pay the amount due, the employment tribunal would judicially compel him to do so, on application by the employee concerned.
30 By decisions of 2 November 2011 and 18 January 2012 respectively, the Liverpool Employment Tribunal and the London Central Employment Tribunal made protective awards in favour of a number of employees dismissed by Woolworths and Ethel Austin. However, approximately 4 500 former employees were denied a protective award on the ground that they had worked at stores with fewer than 20 employees, and that each store was to be regarded as a separate establishment.
31 USDAW and Mrs Wilson appealed against those decisions to the Employment Appeal Tribunal, which held, in a judgment of 30 May 2013, that a reading of section 188(1) of the TULRCA compatible with Directive 98/59 required the deletion of the words ‘at one establishment’, pursuant to the obligation placed on the national court by the judgment in Marleasing (C‑106/89, EC:C:1990:395) to interpret its national law in the light of the wording and the purpose of the directive concerned. The Employment Appeal Tribunal also held that USDAW and Mrs Wilson could rely on the direct effect of rights under Directive 98/59 on the ground that the Secretary of State for Business was a party to the case, and that he was responsible for payment of the protective awards to all of the employees. It is further apparent from that judgment that the prior consultation obligation applies whenever an employer is proposing to dismiss as redundant 20 or more employees within a period of 90 days or less, regardless of the particular establishments at which they work.
32 It is in that context that the Secretary of State for Business applied for permission to appeal to the referring court, which permission was granted by the Employment Appeal Tribunal by order of 26 September 2013.
33 The referring court states that it is common ground between the parties to the main proceedings that when transposing Directive 98/59 the United Kingdom chose the option set out in Article 1(1)(a)(ii) of that directive.
34 That court states that USDAW and Mrs Wilson have submitted before it that the concept of ‘collective redundancy’ in Article 1(1)(a)(ii) of Directive 98/59 is not limited to a situation in which at least 20 employees in each establishment are made redundant over a period of 90 days, but encompasses a situation in which at least 20 employees of the same employer are made redundant over a period of 90 days, whatever the number of workers at the establishments in question, that is to say, the establishments at which the redundancies are made.
35 USDAW and Mrs Wilson submit, in the alternative, that even if that provision of Directive 98/59 is to be read as referring to at least 20 workers being made redundant at each establishment, the term ‘establishment’ is to be construed as consisting of the whole of the retail business operated by Woolworths and Ethel Austin, respectively. They submit that it is the retail business as a whole that is an economic business unit.
36 According to USDAW and Mrs Wilson, to regard each store as constituting an establishment for the purposes of the provision would lead to unjust and arbitrary results where, as in the present case, a large retailer closes down almost all of its business, making redundant a large number of employees at several sales outlets, some employing 20 employees or more, some employing fewer. They submit that in such a situation it does not make sense for the employees of the largest stores to be entitled to a consultation procedure before their collective redundancy, while those who work at smaller stores are denied such consultation.
37 USDAW and Mrs Wilson further submit that since, regardless of the store at which they work, the employees are part of the same redundancy exercise, and the objective of Directive 98/59 is to afford greater protection to workers, such an interpretation of Directive 98/59 would encourage employers to divide up their activities so as avoid the obligations laid down in that directive.
38 USDAW and Mrs Wilson submit that, since the Secretary of State for Business is liable for payment of the protective awards pursuant to Directive 2008/94, they are entitled to rely on the effects of Directive 98/59 under the principle of vertical direct effect, which applies to that directive.
39 Before the referring court, the Secretary of State for Business, referring to the judgments in Rockfon (C‑449/93, EU:C:1995:420) and Athinaïki Chartopoiïa (C‑270/05, EU:C:2007:101), contends that the term ‘establishment’, for the purposes of Article 1(1)(a)(ii) of Directive 98/59, means the unit to which the workers are assigned to carry out their duties, and that the same meaning should be conferred on that term as that given to it for the purposes of Article 1(1)(a)(i) of Directive 75/129 and Article 1(1)(a)(i) of Directive 98/59.
40 The Secretary of State for Business adds that, if the EU legislature had intended Article 1(1)(a)(ii) to refer to all the workers employed by an employer, it would have used a term other than ‘establishment’, for example ‘undertaking’ or ‘employer’.
41 It follows, in his view, that if 19 employees of an establishment are made redundant, there is no ‘collective redundancy’ within the meaning of Directive 98/59, whereas if 20 employees are made redundant, the rights guaranteed by that directive are applicable.
42 In those circumstances, the Court of Appeal of England and Wales (Civil Division) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) (a) In Article 1(1)(a)(ii) of [Directive 98/59], 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 1(1)(a)(ii) [of that directive] 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 [concerned] rely on or plead the fact that [Directive 98/59] does not give rise to directly effective rights against the employer in circumstances where:
(a) 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
(b) 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], subject to any limitation of liability imposed on the Member State’s guarantee institution pursuant to Article 4 of that directive?’
Consideration of the questions referred
43 By its first question, the referring court asks, in essence, first, whether the term ‘establishment’ in Article 1(1)(a)(ii) of Directive 98/59 is to be interpreted in the same way as the term ‘establishment’ in Article 1(1)(a)(i) of that directive and, secondly, whether Article 1(1)(a)(ii) of Directive 98/59 is to be interpreted as precluding national legislation that lays down an obligation to inform and consult workers in the event of the dismissal, within a period of 90 days, of at least 20 workers from a particular establishment of an undertaking, and not where the aggregate number of dismissals across all of the establishments or across some of the establishments of an undertaking over the same period reaches or exceeds the threshold of 20 workers.
44 It is apparent from the order for reference and the observations submitted to the Court that, when transposing Directive 98/59, the United Kingdom opted for the threshold for its application set out in Article 1(1)(a)(ii) of that directive. Under the applicable national law, where an employer is proposing to shed at least 20 jobs at an establishment within a period of 90 days, he is required to comply with a procedure for informing and consulting workers in connection with that proposal.
45 It should be stated from the outset in this connection that, in accordance with the case-law of the Court, the term ‘establishment’, which is not defined in Directive 98/59, is a term of EU law and cannot be defined by reference to the laws of the Member States (see, to that effect, judgment in Rockfon, C‑449/93, EU:C:1995:420, paragraph 25). It must, on that basis, be interpreted in an autonomous and uniform manner in the EU legal order (see, to that effect, judgment in Athinaïki Chartopoiïa, C‑270/05, EU:C:2007:101, paragraph 23).
46 The Court has already interpreted the term ‘establishment’ or ‘establishments’ in Article 1(1)(a) of Directive 98/59.
47 In paragraph 31 of the judgment in Rockfon (C‑449/93, EU:C:1995:420), the Court observed, referring to paragraph 15 of the judgment in Botzen and Others (186/83, EU:C:1985:58), that an employment relationship is essentially characterised by the link existing between the worker and the part of the undertaking or business to which he is assigned to carry out his duties. The Court therefore decided, in paragraph 32 of the judgment in Rockfon (C‑449/93, EU:C:1995:420), that the term ‘establishment’ in Article 1(1)(a) of Directive 98/59 must be interpreted as designating, depending on the circumstances, the unit to which the workers made redundant are assigned to carry out their duties. It is not essential in order for there to be an ‘establishment’ that the unit in question is endowed with a management that can independently effect collective redundancies.
48 It is apparent from paragraph 5 of the judgment in Rockfon (C‑449/93, EU:C:1995:420) that the Kingdom of Denmark — the Member State of the court which made the request for a preliminary ruling in that case — had opted for the approach set out in Article 1(1)(a)(i) of the directive.
49 In the judgment in Athinaïki Chartopoiïa (C‑270/05, EU:C:2007:101), the Court further clarified the term ‘establishment’, inter alia by holding, in paragraph 27 of that judgment, that, for the purposes of the application of Directive 98/59, an ‘establishment’, in the context of an undertaking, may consist of a distinct entity, having a certain degree of permanence and stability, which is assigned to perform one or more given tasks and which has a workforce, technical means and a certain organisational structure allowing for the accomplishment of those tasks.
50 By the use of the words ‘distinct entity’ and ‘in the context of an undertaking’, the Court clarified that the terms ‘undertaking’ and ‘establishment’ are different and that an establishment normally constitutes a part of an undertaking. That does not, however, preclude the establishment being the same as the undertaking where the undertaking does not have several distinct units.
51 In paragraph 28 of the judgment in Athinaïki Chartopoiïa (C‑270/05, EU:C:2007:101), the Court held that since Directive 98/59 concerns the socio-economic effects that collective redundancies may have in a given local context and social environment, 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’.
52 Consequently, according to the case-law of the Court, where an ‘undertaking’ comprises several entities meeting the criteria set out in paragraphs 47, 49 and 51 above, it is the entity to which the workers made redundant are assigned to carry out their duties that constitutes the ‘establishment’ for the purposes of Article 1(1)(a) of Directive 98/59.
53 That case-law is applicable to the present case.
54 The meaning of the terms ‘establishment’ or ‘establishments’ in Article 1(1)(a)(i) of Directive 98/59 is the same as that of the terms ‘establishment’ or ‘establishments’ in Article 1(1)(a)(ii) of that directive.
55 The fact, noted during the hearing before the Court, that the term ‘establishment’ is used in the plural inter alia in the English, French, Italian and Spanish versions of that provision is of no account. In those language versions, the term ‘establishments’ is used in the plural in both Article 1(1)(a)(i) and (a)(ii). In addition, as the Advocate General observed in point 53 of his Opinion, a number of other language versions of Article 1(1)(a)(ii) of Directive 98/59 use that term in the singular, which precludes the interpretation that the threshold provided for in the latter provision refers to all the ‘establishments’ of an ‘undertaking’.
56 The option in Article 1(1)(a)(ii) of Directive 98/59, with the exception of the difference in the periods over which the redundancies are made, is a substantially equivalent alternative to the option in Article 1(1)(a)(i).
57 There is nothing in the wording of Article 1(1)(a) of Directive 98/59 to suggest that a different meaning is to be given to the terms ‘establishment’ or ‘establishments’ in the same subparagraph of that provision.
58 In the judgment in Athinaïki Chartopoiïa (C‑270/05, EU:C:2007:101) the Court did not examine whether the Hellenic Republic had opted for the approach set out in Article 1(1)(a)(i) or (a)(ii) of Directive 98/59. The operative part of that judgment refers to Article 1(1)(a) without drawing a distinction between the options set out in points (a)(i) or (a)(ii) of that provision.
59 The fact that the legislature offers Member States a choice between the options set out in Article 1(1)(a)(i) and (a)(ii) of Directive 98/59 indicates that the term ‘establishment’ cannot have a completely different meaning depending on which of the two alternatives proposed the Member State concerned chooses.
60 Furthermore, such a major difference would be contrary to the need to promote the approximation of the laws of the Member States relating to collective redundancies, a need that is emphasised in recital 7 of Directive 98/59.
61 As regards the question raised by the referring court as to whether Article 1(1)(a)(ii) of Directive 98/59 requires that account be taken of the dismissals effected in each establishment considered separately, interpreting that provision so as to require account to be taken of the total number of redundancies across all the establishments of an undertaking would, admittedly, significantly increase the number of workers eligible for protection under Directive 98/59, which would correspond to one of the objectives of that directive.
62 However, it should be recalled that the objective of that directive is not only to afford greater protection to workers in the event of collective redundancies, but also to ensure comparable protection for workers’ rights in the different Member States and to harmonise the costs which such protective rules entail for EU undertakings (see, to that effect, judgments in Commission v United Kingdom, C‑383/92, EU:C:1994:234, paragraph 16; Commission v Portugal, C‑55/02, EU:C:2004:605, paragraph 48; and Confédération générale du travail and Others, C‑385/05, EU:C:2007:37, paragraph 43).
63 Interpreting the term ‘establishment’ in the manner envisaged in paragraph 61 above would, first, be contrary to the objective of ensuring comparable protection for workers’ rights in all Member States and, secondly, entail very different costs for the undertakings that have to satisfy the information and consultation obligations under Articles 2 to 4 of that directive in accordance with the choice of the Member State concerned, which would also go against the EU legislature’s objective of rendering comparable the burden of those costs in all Member States.
64 It should be added that that interpretation would bring within the scope of Directive 98/59 not only a group of workers affected by collective redundancy but also, in some circumstances, a single worker of an establishment — possibly of an establishment located in a town separate and distant from the other establishments of the same undertaking — which would be contrary to the ordinary meaning of the term ‘collective redundancy’. In addition, the dismissal of that single worker could trigger the information and consultation procedures referred to in the provisions of Directive 98/59, provisions that are not appropriate in such an individual case.
65 It should be recalled, however, that Directive 98/59 establishes minimum protection with regard to informing and consulting workers in the event of collective redundancies (see judgment in Confédération générale du travail and Others, C‑385/05, EU:C:2007:37, paragraph 44). Article 5 of that directive gives Member States the right to apply or to introduce laws, regulations or administrative provisions which are more favourable to workers or to promote or to allow the application of collective agreements more favourable to workers.
66 In connection with that right, Article 5 of Directive 98/59 inter alia allows Member States to grant the protection provided for in that directive not only to workers at one establishment, within the meaning of Article 1(1)(a) of the directive, who have been or who will be made redundant, but also to all workers affected by redundancy in an undertaking or in a part of an undertaking of the same employer, the term ‘undertaking’ being understood as covering all of the separate employment units of that undertaking or of that part of the undertaking.
67 Although the Member States are therefore entitled to lay down more favourable rules for workers on the basis of Article 5 of Directive 98/59, they are nevertheless bound by the autonomous and uniform interpretation given to the EU law term ‘establishment’ in Article 1(1)(a)(i) and (ii) of that directive, as set out in paragraph 52 above.
68 It follows from the foregoing that the definition in Article 1(1)(a)(i) and (a)(ii) of Directive 98/59 requires that account be taken of the dismissals effected in each establishment considered separately.
69 The interpretation that the Court has given to the term ‘establishment’, recalled in paragraphs 47, 49 and 51 above, is supported by the provisions of Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishing a general framework for informing and consulting employees in the European Community (OJ 2002 L 80, p. 29), Article 2(a) and (b) of which also establishes a clear distinction between the term ‘undertaking’ and the term ‘establishment’.
70 In the present case, it is apparent from the observations submitted to the Court that because the dismissals at issue in the main proceedings were effected within two large retail groups carrying out their activities from stores situated in different locations throughout the United Kingdom, employing in most cases fewer than 20 employees, the employment tribunals took the view that the stores to which the employees affected by those dismissals were assigned were separate ‘establishments’. It is for the referring court to establish whether that is the case in the light of the specific circumstances of the dispute in the main proceedings, in accordance with the case-law recalled in paragraphs 47, 49 and 51 above.
71 In those circumstances, the answer to the first question is that, first, the term ‘establishment’ in Article 1(1)(a)(ii) of Directive 98/59 must be interpreted in the same way as the term in Article 1(1)(a)(i) of that directive and, secondly, that Article 1(1)(a)(ii) of Directive 98/59 must be interpreted as not precluding national legislation that lays down an obligation to inform and consult workers in the event of the dismissal, within a period of 90 days, of at least 20 workers from a particular establishment of an undertaking, and not where the aggregate number of dismissals across all of the establishments or across some of the establishments of an undertaking over the same period reaches or exceeds the threshold of 20 workers.
72 Since the Court’s examination has not indicated that the law of the United Kingdom at issue in the main proceedings was incompatible with Directive 98/59, there is no need to reply to the second question.
Costs
73 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby rules:
The term ‘establishment’ in Article 1(1)(a)(ii) of Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies must be interpreted in the same way as the term in Article 1(1)(a)(i) of that directive.
Article 1(1)(a)(ii) of Directive 98/59 must be interpreted as not precluding national legislation that lays down an obligation to inform and consult workers in the event of the dismissal, within a period of 90 days, of at least 20 workers from a particular establishment of an undertaking, and not where the aggregate number of dismissals across all of the establishments or across some of the establishments of an undertaking over the same period reaches or exceeds the threshold of 20 workers.
[Signatures]
Akavan Erityisalojen Keskusliitto AEK & Ors
[2010] ICR 444, [2009] IRLR 944, [2010] 1 CMLR 11, [2009] ECR I-8163, [2010] CEC 801, [2009] EUECJ C-44/08
Judgment
This reference for a preliminary ruling concerns the interpretation of Article 2 of Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies (OJ 1998 L 225, p. 16).
The reference was made by the Korkein oikeus (Supreme Court) in the course of proceedings between Akavan Erityisalojen Keskusliitto AEK ry and Others and Fujitsu SiemensComputers Oy (‘FSC’) concerning the obligation to hold consultations with workers’ representatives in the event of collective redundancies.
Legal context
Community law
On 17 February 1975 the Council of the European Communities adopted Directive 75/129/EEC on the approximation of the laws of the Member States relating to collective redundancies (OJ 1975 L 48, p. 29), which was amended by Council Directive 92/56/EEC of 24 June 1992 (OJ 1992 L 245, p. 3).
Directive 75/129 was repealed by Directive 98/59. Recitals 2, 9 and 11 of the preamble to the latter directive state as follows:
‘… it is important that greater protection should be afforded to workers in the event of collective redundancies while taking into account the need for balanced economic and social development within the Community;
…
… it should be stipulated that this Directive applies in principle also to collective redundancies resulting where the establishment’s activities are terminated as a result of a judicial decision;
…
… it is necessary to ensure that employers’ obligations as regards information, consultation and notification apply independently of whether the decision on collective redundancies emanates from the employer or from an undertaking which controls that employer.’
Article 2(1) of that directive provides:
‘Where an employer is contemplating collective redundancies, he shall begin consultations with the workers’ representatives in good time with a view to reaching an agreement.’
The first subparagraph of Article 2(2) of that directive provides:
‘These consultations shall, at least, cover ways and means of avoiding collective redundancies or reducing the number of workers affected, and of mitigating the consequences by recourse to accompanying social measures aimed, inter alia, at aid for redeploying or retraining workers made redundant.’
The first subparagraph of Article 2(3) of Directive 98/59 states that, to enable workers’ representatives to make constructive proposals, an employer is bound, in good time during the course of the consultations, to supply them with all relevant information and to notify them in writing of the matters specified in that subparagraph.
Under Article 2(4) of Directive 98/59:
‘The obligations laid down in paragraphs 1, 2 and 3 shall apply irrespective of whether the decision regarding collective redundancies is being taken by the employer or by an undertaking controlling the employer.
In considering alleged breaches of the information, consultation and notification requirements laid down by this Directive, account shall not be taken of any defence on the part of the employer on the ground that the necessary information has not been provided to the employer by the undertaking which took the decision leading to collective redundancies.’
Article 3(1) of that directive is worded as follows:
‘Employers shall notify the competent public authority in writing of any projected collective redundancies.
…
This notification shall contain all relevant information concerning the projected collective redundancies and the consultations with workers’ representatives provided for in Article 2, and particularly the reasons for the redundancies, the number of workers to be made redundant, the number of workers normally employed and the period over which the redundancies are to be effected.’
Article 4(1) and (2) of that directive provide:
‘1. Projected collective redundancies notified to the competent public authority shall take effect not earlier than 30 days after the notification referred to in Article 3(1) without prejudice to any provisions governing individual rights with regard to notice of dismissal.
Member States may grant the competent public authority the power to reduce the period provided for in the preceding subparagraph.
2. The period provided for in paragraph 1 shall be used by the competent public authority to seek solutions to the problems raised by the projected collective redundancies.’
National law
Paragraph 1 of Law 725/1978 on cooperation within undertakings [yhteistoiminnasta yrityksissä annettu laki (725/1978)], as amended by Laws 51/1993 and 906/1996 (the ‘Law on cooperation’), provides that, in order to develop the activity and working conditions of undertakings and to strengthen cooperation between the employer and the workforce and mutual cooperation within the workforce, employees are given increased opportunities to influence the handling of matters concerning their work and workplace.
Under Paragraph 6(3) and (3b) of the Law on cooperation, the scope of the cooperation procedure covers the closure or transfer to another location of an undertaking or part of it or a substantial expansion or reduction of its activity and also, inter alia, the introduction of part-time working, laying off and redundancies for production or economic reasons.
Paragraph 7(1) of that law provides that, before the employer takes a decision referred to in Paragraph 6, he must consult the employees and the agents or representatives of the workforce concerned on the grounds for, effects of and alternatives to the measure. Under Paragraph 7(2), the employer must, before starting the cooperation procedure, give the necessary information on the measure in question to the relevant employees and the representatives of the workforce concerned. That information such as information on the reasons for the planned redundancies, an estimate of the number of employees in different categories who are to be made redundant, an estimate of the period within which the planned redundancies are scheduled to be made, and information on the principles on the basis of which the employees to be made redundant are determined must be supplied in writing where the employer contemplates redundancies, lay-offs for a period of over 90 days or part-time working for at least 10 employees.
Paragraph 7a(1) provides that in cases referred to in Paragraph 6(1) to (5), a consultation proposal must be made in writing at least five days before the start of consultations, if the measure to be consulted on will evidently lead to the part-time working, redundancy or laying off of one or more employees.
Under Paragraph 7b of the Law on cooperation, if a consultation proposal concerns measures relating to reducing the workforce, the proposal or the information contained in it must be notified in writing to the labour authorities when the consultation begins, unless corresponding information has been sent previously in another context. If relevant material gathered during the consultation differs substantially from the information sent previously, the employer must also supply that material to the labour authorities.
Under Paragraph 8 of that law, unless another procedure has been agreed between the employer and the representatives of the workforce, the employer is deemed to have fulfilled the obligation to hold consultations where the intended measure has been dealt with in the manner laid down in Paragraph 7. However, if that measure will evidently lead to at least 10 employees being put on part-time working, made redundant or laid off for more than 90 days, the employer is deemed not to have fulfilled his obligation to hold consultations until at least six weeks have passed from the start of the consultations. In addition, the consideration of alternatives to the intended measure may start at the earliest seven days after consideration of the grounds and effects, unless agreed otherwise.
Under Paragraph 15a of the Law on cooperation, if a matter has intentionally or through manifest negligence been decided on without complying with the provisions of Paragraph 7(1) to (3) or Paragraph 7a or Paragraph 8 of that law, and if an employee has for reasons connected with that decision been placed on part-time working, laid off or made redundant, the employee is entitled to receive compensation of a maximum of 20 months’ pay from the employer.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Following the merger of certain IT businesses of Fujitsu Ltd and Siemens AG into a joint undertaking, the Fujitsu Siemens Computers group started trading on 1 October 1999.
FSC is a subsidiary of Fujitsu Siemens Computers (Holding) BV (the ‘parent company’), a company established in the Netherlands. At that time, the group had production plants in Espoo (Kilo) (Finland) and in Augsburg, Paderborn and Sömmerda (Germany).
At a meeting held on 7 December 1999, the executive council of the parent company, which consists of the executive members of its board of directors, decided to make a proposal to the board of directors for the divestiture of the Kilo factory.
At a meeting of 14 December 1999, that board of directors decided to support the proposal, but no specific decision was taken in relation to that factory.
On the same day, FSC proposed consultations, which took place between 20 December 1999 and 31 January 2000.
On 1 February 2000 FSC’s board of directors, mainly consisting of directors of the group and chaired by the deputy chairman of the parent company’s board of directors, took a decision to terminate FSC’s operations in Finland with the exception of computer sales. On 8 February 2000 FSC began making employees redundant. In total, some 450 of the 490 employees of the company were made redundant.
Some employees claimed that FSC had infringed the Law on cooperation in the course of the decisions taken at the end of 1999 and the beginning of 2000 with regard to the closure of the Kilo factory. Those employees assigned their claims for compensation under that law to the appellants in the main proceedings, who are trade unions, so that they could seek recovery. The appellants brought an action before the Espoon käräjäoikeus (Court of first instance in Espoo) for that purpose.
During the proceedings before that court, the appellants in the main proceedings claimed that a final decision to run down the activity of the Kilo factory and to separate it from the group’s activity before transferring it to Germany, so that that production plant would no longer be part of the group, had in fact been taken by the parent company’s board of directors by 14 December 1999 at the latest. According to the appellants in the main proceedings, the real decision had been taken on 14 December 1999, before the consultations with the workforce required by the Law on cooperation had taken place. The respondent in the main proceedings had therefore, intentionally or through manifest negligence, failed to comply with that law.
FSC for its part asserted, first, that no decision on the production plant had been taken at the meeting of the parent company’s board of directors on 14 December 1999 and, second, that possible alternatives still existed, such as the continuation of the activity, as it was or in a reduced form, its sale or its continuation in partnership with another undertaking. FSC further contended that the concept of a decision by the employer implies action by the competent body of the company concerned, namely, in this case, its board of directors, and that the decision on termination had been taken by the board of directors on 1 February 2000, in other words after conclusion of consultations.
The Espoon käräjäoikeus held that the appellants in the main proceedings had not shown that the parent company’s board of directors had decided to close the Kilo factory in such a way that the interaction between the employer and the employees within FSC could not take place in the manner prescribed by the Law on cooperation. In the opinion of that court, the alternatives to closure of that factory were genuine and those alternatives had been examined in the course of the consultations. The court held that the decision on closure had been taken at the meeting of FSC’s board on 1 February 2000, after it had proved impossible to find another solution, and that the consultations had been genuine and appropriate, and accordingly dismissed the action.
On appeal, the Helsingin hovioikeus (Helsinki Court of Appeal) stated that the final decision referred to by Paragraph 7(1) of the Law on cooperation could only have been taken by the employer, namely the respondent in the main proceedings, and that the proposals made by the parent company were not within the scope of the obligation to hold consultations imposed by that law. It accordingly upheld the decision of the Espoon käräjäoikeus.
The Korkein oikeus, before whom an appeal was then brought by the appellants in the main proceedings, held that there were differences both of structure and content between the provisions of Directive 98/59 and of the Law on cooperation and that, consequently, the connection between them was not entirely clear.
The Korkein oikeus considered that an interpretation of the provisions of Directive 98/59 was necessary for its decision and therefore decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) Is Article 2(1) of Directive 98/59/EC to be interpreted as meaning that the obligation under that provision to embark on consultations when ‘contemplating collective redundancies’ of employees and ‘in good time’ requires consultations to be started when it is established from strategic decisions or changes that have been made relating to the activity that a need for collective redundancies of employees follows? Or is the provision in question to be interpreted as meaning that the obligation to start consultations already arises on the basis of the employer contemplating measures or changes affecting the activity, such as a change in production capacity or a concentration of production, as a consequence of which a need for collective redundancies is to be expected?
(2) Having regard to the fact that the first subparagraph of Article 2(3) of Directive 98/59 refers to the supply of information in good time during the course of the consultations, is Article 2(1) of [that] directive to be interpreted as meaning that the obligation under that provision to start consultations when ‘contemplating’ collective redundancies and ‘in good time’ requires consultations to be started already before the employer’s intentions have reached the stage at which the employer is required to identify and supply to the employees the information specified in Article 2(3)(b) [of that directive]?,
(3) Is Article 2(1) in conjunction with Article 2(4) of Directive 98/59 to be interpreted as meaning that, in a situation in which the employer is controlled by another undertaking, the employer’s obligation to start consultations with the representatives of the employees originates when either the employer or the parent company controlling the employer contemplates action for collective redundancies of employees in the employer’s service?
(4) In the case of consultations to be carried on in a subsidiary belonging to a group, and in assessing in the light of the provisions of Article 2(4) of Directive 98/59 the obligation under Article 2(1) to enter into consultations when ‘contemplating’ collective redundancies and ‘in good time’, does the obligation to start consultations already arise when the management of the group or the parent company contemplates collective redundancies but that intention has not yet taken concrete form as concerning the employees in the service of a particular subsidiary under its control, or does the obligation to embark on consultations within the subsidiary arise only at the stage when the management of the group or the parent company contemplates collective redundancies specifically in that subsidiary company?
(5) If the employer is an undertaking (a subsidiary belonging to a group) controlled within the meaning of Article 2(4) of Directive 98/59 by another undertaking (parent company or group management), is [that] Article 2 … to be interpreted as meaning that the consultation procedure referred to there must be concluded before the decision on collective redundancies to be implemented in the subsidiary company is taken within the parent company or the group management?
(6) If Directive 98/59 is to be interpreted in such a way that the consultation procedure to be carried on within the subsidiary company must be concluded before the decision giving rise to collective redundancies of employees [of that subsidiary] is taken within the parent company or group management, is it only a decision whose direct consequence is the implementation of collective redundancies in the subsidiary company that is relevant in that connection, or must the consultation procedure be brought to a conclusion already before a commercial or strategic decision is taken within the parent company or the group management on the basis of which collective redundancies in the subsidiary company are probable but not yet finally certain?’
The questions referred for a preliminary ruling
Admissibility
FSC contends that the first four questions in the reference for a preliminary ruling are inadmissible, because they bear no relation to the dispute in the main proceedings. FSC considers that, since the time when consultations ought to be started with workers’ representatives is not at issue in the pleadings submitted by the appellants in the main proceedings, a reply to those questions is not required for the resolution of the dispute in the main proceedings. Moreover, according to FSC, the reference, in that regard, concerns a hypothetical situation.
It must be recalled that, in the proceedings established by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of Community law, the Court is in principle bound to give a ruling (see, inter alia, Case C-119/05 Lucchini [2007] ECR I-6199, paragraph 43, and Case C-12/08 Mono Car Styling [2009] ECR I-0000, paragraph 27).
Accordingly, the Court may reject a request for a preliminary ruling submitted by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, Case C-221/07 Zablocka-Weyhermüller [2008] ECR I-0000, paragraph 20, and Mono Car Styling, paragraph 28).
In this case, it must be stated that, as is clear from the order for reference, the referring court has provided the Court with a detailed explanation of the factual and legal background to the dispute in the main proceedings, together with the reasons why it considered that an answer to the first four questions referred is necessary for its decision.
Consequently, the questions referred for a preliminary ruling are admissible.
The first question
By its first question, the referring court seeks clarification of the meaning of the expression ‘is contemplating collective redundancies’, in Article 2(1) of Directive 98/59, in order to determine the time at which the obligation to hold consultations, laid down in Article 2, starts. The court asks, in that regard, whether that obligation arises when it is established that strategic decisions or changes in the business of the undertaking will make collective redundancies of employees necessary, or when the adoption of such decisions or changes, as a result of which it is to be expected that such redundancies will become necessary, are contemplated.
First, it is to be noted that the present case relates to economic and commercial decisions which might have repercussions on the employment of a number of workers within an undertaking, and not to decisions which are directly concerned with terminating specific employment relationships.
In that regard, it must be recalled that, as is clear from the wording of Articles 2(1) and 3(1) of Directive 98/59, the obligations of consultation and notification imposed on the employer come into being prior to the employer’s decision to terminate employment contracts (see, to that effect, Case C-188/03 Junk [2005] ECR I-885, paragraphs 36 and 37). In such a case, there is still a possibility of avoiding or at least reducing collective redundancies, or of mitigating the consequences.
Under Article 2(1) of Directive 98/59, the employer has the obligation to start consultations with the workers’ representatives in good time if he ‘is contemplating collective redundancies’. As stated by the Advocate General in points 48 and 49 of his Opinion, it is clear from comparison of various language versions of that provision that the Community legislature envisaged that the obligation at issue to hold consultations would arise in connection with the existence of an intention on the part of the employer to make collective redundancies.
The references in Articles 3 and 4 of Directive 98/59 to ‘projected’ collective redundancies confirm that the existence of such an intention is the factor which triggers the obligations laid down by that directive, in particular by Article 2.
It follows that the obligation to hold consultations laid down in Article 2 of Directive 98/59 is deemed to arise where the employer is contemplating collective redundancies or is drawing up a plan for collective redundancies (see, to that effect, Case 284/83 Dansk Metalarbejderforbund and Specialarbejderforbundet i Danmark [1985] ECR 553, paragraph 17).
It must however be added that, as is clear from the actual wording, the obligations laid down by Directive 98/59, in particular the obligation to hold consultations laid down in Article 2, are also triggered in situations where the prospect of collective redundancies is not directly the choice of the employer.
Under Article 2(4) of that directive, the employer is responsible for compliance with the information and consultation requirements stemming from that directive, even if the decision on collective redundancies is made not by the employer, but by the undertaking controlling the employer, and even though the employer may not have been immediately and properly informed of that decision.
Against an economic background marked by the increasing presence of groups of undertakings, that provision serves to ensure, where one undertaking is controlled by another, that the purpose of Directive 98/59, which, as is stated in recital 2 of its preamble, seeks to promote greater protection for workers in the event of collective redundancies, is actually achieved (Case C-270/05 Athinaïki Chartopoiïa [2007] ECR I-1499, paragraph 25).
Moreover, as the United Kingdom Government rightly observes, a premature triggering of the obligation to hold consultations could lead to results contrary to the purpose of Directive 98/59, such as restricting the flexibility available to undertakings when restructuring, creating heavier administrative burdens and causing unnecessary uncertainty for workers about the safety of their jobs.
Lastly, the raison d’être and effectiveness of consultations with the workers’ representatives presuppose that the factors to be taken into account in the course of those consultations have been determined, given that it is impossible to undertake consultations in a manner which is appropriate and consistent with their objectives when there has been no definition of the factors which are of relevance with regard to the collective redundancies contemplated. Those objectives are, under Article 2(2) of Directive 98/59, to avoid termination of employment contracts or to reduce the number of workers affected, and to mitigate the consequences (see Junk, paragraph 38). However, where a decision deemed likely to lead to collective redundancies is merely contemplated and where, accordingly, such collective redundancies are only a probability and the relevant factors for the consultations are not known, those objectives cannot be achieved.
On the other hand, it is clear that to draw a link between the requirement to hold consultations arising under Article 2 of Directive 98/59 and the adoption of a strategic or commercial decision which makes the collective redundancies of workers necessary may deprive that requirement, in part, of its effectiveness. As is clear from the first subparagraph of that Article 2(2), the consultations must cover, inter alia, the possibility of avoiding or reducing the collective redundancies contemplated. A consultation which began when a decision making such collective redundancies necessary had already been taken could not usefully involve any examination of conceivable alternatives with the aim of avoiding them.
It must therefore be held that, in circumstances such as those of the case in the main proceedings, the consultation procedure must be started by the employer once a strategic or commercial decision compelling him to contemplate or to plan for collective redundancies has been taken.
In those circumstances, the answer to be given to the first question referred is that Article 2(1) of Directive 98/59 must be interpreted to mean that the adoption, within a group of undertakings, of strategic decisions or of changes in activities which compel the employer to contemplate or to plan for collective redundancies gives rise to an obligation on that employer to consult with workers’ representatives.
The second question
By its second question, the referring court asks, in essence, if whether the obligation has arisen for the employer to start consultations on collective redundancies contemplated depends on whether the employer is already able to supply to the workers’ representatives all the information required in Article 2(3)(b) of Directive 98/59.
The wording of that provision states clearly that the information specified must be supplied by the employer ‘in good time during the course of the consultations’, in order to ‘enable workers’ representatives to make constructive proposals’.
It follows from that provision that that information can be provided during the consultations, and not necessarily at the time when they start.
As stated by the Advocate General in points 64 and 65 of his Opinion, the logic of that provision is that the employer is to supply to the workers’ representatives the relevant information throughout the course of the consultations. Flexibility is essential, given, first, that that information may become available only at various stages in the consultation process, which implies that the employer both can and must add to the information supplied in the course of that process. Secondly, the purpose of the employer being under that obligation is to enable the workers’ representatives to participate in the consultation process as fully and effectively as possible, and, to achieve that, any new relevant information must be supplied up to the end of the process.
It follows that the time at which consultations are to start cannot be dependent on whether the employer is already able to supply to the workers’ representatives all the necessary information referred to in Article 2(3)(b) of Directive 98/59.
The answer to be given to the second question referred is that whether the obligation has arisen for the employer to start consultations on the collective redundancies contemplated does not depend on whether the employer is already able to supply to the workers’ representatives all the information required in Article 2(3)(b) of Directive 98/59.
The third and fourth questions
By its third and fourth questions, which can be answered together, the referring court seeks to know, in essence, first, whether Article 2(1) of Directive 98/59, read in conjunction with the first paragraph of Article 2(4) of that directive, should be interpreted to mean that, in the case of a group of undertakings consisting of a parent company and one or more subsidiaries, the obligation to consult with workers’ representatives arises when either the employer or the parent company which controls the employer is contemplating collective redundancies and, secondly, in order for an obligation to start consultations to arise must the subsidiary within which collective redundancies may be made be identified.
In that regard, it is clear that, under Article 2(1) and (3) and Article 3(1) and (2) of Directive 98/59, the only party on whom the obligations to inform, consult and notify are imposed is the employer, in other words a natural or legal person who stands in an employment relationship with the workers who may be made redundant.
An undertaking which controls the employer, even if it can take decisions which are binding on the latter, does not have the status of employer.
As stated by the Commission of the European Communities, first, how the management of a group of undertakings is organised is an internal matter and, secondly, it is not the purpose of Directive 98/59, any more than it was of Directive 75/129, to restrict the freedom of such a group to organise their activities in the way which they think best suits their needs (see, to that effect, as regards Directive 75/129, Case C-449/93 Rockfon [1995] ECR I-4291, paragraph 21).
Directive 98/59, like Directive 75/129, carries out only a partial harmonisation of the rules for the protection of workers in the event of collective redundancies. It is therefore not designed to bring about full harmonisation of national systems of worker representation in undertakings (see, concerning Directive 75/129, Case C-383/92 Commission v United Kingdom [1994] ECR I-2479, paragraph 25 and case-law there cited).
In the context of that partial harmonisation, as stated by the appellants in the main proceedings, the Community legislature intended, by adopting Directive 92/56 and then Directive 98/59, to fill a gap in its earlier legislation and to add clarification concerning the obligations of employers who are part of a group of undertakings. Accordingly, Article 2(4) of Directive 98/59 provides that the obligation to hold consultations applies to the employer irrespective of whether the decision regarding collective redundancies is being taken by the employer or by an undertaking controlling that employer.
Consequently, Article 2(1) and the first subparagraph of Article 2(4) of Directive 98/59 are to be interpreted to the effect that, under those provisions, irrespective of whether collective redundancies are contemplated or projected as a result of a decision of the undertaking which employs the workers concerned or a decision of its parent company, it is always the former which is obliged, as the employer, to start consultations with the representatives of its workers.
As regards the time at which that obligation arises, it is evident, as observed by the Finnish Government, that consultations with the workers’ representatives can be started only if it is known in which undertaking collective redundancies may be made. Where the parent company of a group of undertakings adopts decisions likely to have repercussions on the jobs of workers within that group, it is for the subsidiary whose employees may be affected by redundancies, in its capacity as their employer, to start consultations with the workers’ representatives. It is therefore not possible to start such consultations until such time as that subsidiary has been identified.
In addition, with regard to the intended objectives of the consultations, under Article 2(2) of Directive 98/59, those consultations are, at least, to cover ways and means of avoiding collective redundancies or reducing the number of workers affected, and of mitigating the consequences by recourse to accompanying social measures aimed, inter alia, at aid for redeploying or retraining workers made redundant. If a consultation on those matters is to have any meaning, the subsidiary whose employees will be affected by the contemplated collective redundancies must be known.
In those circumstances, the answer to be given to the third and fourth questions referred is that Article 2(1) of Directive 98/59, read in conjunction with the first subparagraph of Article 2(4) of that directive, must be interpreted to mean that, in the case of a group of undertakings consisting of a parent company and one or more subsidiaries, the obligation to hold consultations with the workers’ representatives falls on the subsidiary which has the status of employer only once that subsidiary, within which collective redundancies may be made, has been identified.
The fifth and sixth questions
By its fifth and sixth questions, the referring court seeks clarification on when the consultation procedure, laid down in Article 2(1) of Directive 98/59, is to be concluded, in the case where, when there is a group of undertakings consisting of a parent company and one or more subsidiaries, the decision which either may or must lead to collective redundancies is taken within the parent company.
As explained in relation to the answer given to the third and fourth questions, the obligation to hold consultations laid down in Article 2(1) of Directive 98/59 is binding solely on the employer.
There is no provision in that directive which can be interpreted to the effect that it may impose such an obligation on the parent company.
It follows that it is always for the subsidiary, as the employer, to undertake consultations with the representatives of the workers who may be affected by the collective redundancies contemplated and, if necessary, itself to bear the consequences of failure to fulfil the obligation to hold consultations if it has not been immediately and properly informed of a decision by its parent company making such redundancies necessary.
As regards the conclusion of the consultation procedure, the Court has previously ruled that, where Directive 98/59 is applicable, an employment contract can be terminated by the employer only after that procedure is concluded, in other words after the employer has fulfilled the obligations set out in Article 2 of that directive (see Junk, paragraph 45). It follows that the consultation procedure must be completed before any decision on the termination of employees’ contracts is taken.
In the context of a group of undertakings such as that in question in the main proceedings, it follows from that case-law that a decision by the parent company which has the direct effect of compelling one of its subsidiaries to terminate the contracts of employees affected by the collective redundancies can be taken only on the conclusion of the consultation procedure within that subsidiary, failing which the subsidiary, as the employer, is liable for the consequences of failure to comply with that procedure.
In light of the foregoing, the answer to be given to the fifth and sixth questions referred is that Article 2(1) of Directive 98/59, read in conjunction with Article 2(4) of that directive, must be interpreted to mean that, in the case of a group of undertakings, the consultation procedure must be concluded by the subsidiary affected by the collective redundancies before that subsidiary, on the direct instructions of its parent company or otherwise, terminates the contracts of the employees who are to be affected by those redundancies.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fourth Chamber) hereby rules:
1. Article 2(1) of Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies must be interpreted to mean that the adoption, within a group of undertakings, of strategic decisions or of changes in activities which compel the employer to contemplate or to plan for collective redundancies gives rise to an obligation on that employer to hold consultations with workers’ representatives.
2. Whether the obligation has arisen for the employer to start consultations on the collective redundancies contemplated does not depend on whether the employer is already able to supply to the workers’ representatives all the information required in Article 2(3)(b) of Directive 98/59.
3. Article 2(1) of Directive 98/59, read in conjunction with the first subparagraph of Article 2(4) of that directive, must be interpreted to mean that, in the case of a group of undertakings consisting of a parent company and one or more subsidiaries, the obligation to hold consultations with the workers’ representatives falls on the subsidiary which has the status of employer only once that subsidiary, within which collective redundancies may be made, has been identified.
4. Article 2(1) of Directive 98/59, read in conjunction with Article 2(4) of that directive, must be interpreted to mean that, in the case of a group of undertakings, the consultation procedure must be concluded by the subsidiary affected by the collective redundancies before that subsidiary, on the direct instructions of its parent company or otherwise, terminates the contracts of employees who are to be affected by those redundancies.
[Signatures]
Tangney & anor -v- Dell Products Limerick
[2013] IEHC 622
Birmingham J.
1. This matter comes before the Court by way of an appeal from a determination of the Employment Appeals Tribunal (hereinafter “EAT”) dated 5th June, 2012. That decision had dismissed a complaint on behalf of the applicant and twenty seven others that the respondent had breached the terms of section 9 of the Protection of Employment Act, 1977 as amended. The decision of the EAT was itself reached on an appeal from a decision of the Rights Commissioner dated the 12th November, 2009 which had concluded that the respondent had breached section 9 of the Protection of Employment Act 1977. Under section 8(4)(b) of the Employment (Information) Act 1994, provision is made for an appeal from a determination of the EAT to the High Court on a point of law, but the determination of the High Court is final and conclusive.
The factual background
2. Dell Products, Limerick (Dell) is one of the largest multi-national companies active in Ireland. In 2009 it embarked on a worldwide rationalisation and re-organisation of its activities which saw the cessation of manufacturing in Ireland which had previously been carried on at its premises at Raheen Business Park in Limerick.
3. On 8th January, 2009 the appellants and other employees received a written communication from their employer furnishing information as to the employer’s plan. On the same day a staff meeting was held at which employees were briefed by senior management figures. In essence the case that has been made by the applicants throughout is that what occurred on 8th January, 2009 (the written communication and the briefing at the staff meeting) constituted a notice of dismissal and accordingly that any discussion that took place thereafter came too late to be effective. It is the case that following on from what occurred on 8th January, 2009, Dell engaged in a consultation and discussion process with its employees and their designated representatives. Discussions took place with a representative group known as the Site Communication Team (SCT) and with an ad hoc group styled as the Dell Employees Representative Committee (DERC).
4. In the course of argument I have been told by counsel for the respondent that the fact that the redundancy package was modified at an additional cost to the employer of approximately €9 million euro shows that the consultation process that occurred was a meaningful, worthwhile and effective one.
5. I will return to the communications of 8th January, 2009 in greater detail but at this stage it will be evident that the core issue in this appeal is whether a notice of dismissal took place on 8th January, 2009, and that accordingly whatever consultations took place thereafter came too late, or whether, as contended by Dell, what occurred on 8th January, 2009 and thereafter was sufficient to comply in full with all statutory obligations.
Legislation
6. It is convenient to refer at this stage to the Irish and European legislation that appears in issue. The Irish legislation with which we are concerned is the Protection of Employment Act 1977, as amended and in particular Part 2 thereof. Section 9 provides as follows:
Obligation on Employer to Consult Employees Representatives.
9 – (1) Where an employer proposes to create collective redundancies he shall, with a view to reaching an agreement, initiate consultations with employees’ representatives
(2) Consultations under this section shall include the following matters –
(a) the possibility of avoiding the proposed redundancies, reducing the number of employees affected by them or, mitigating their consequences by recourse to accompanying social measures, aimed, inter alia, at aid for redeploying or retraining employees made redundant
(b) the basis on which it will be decided which particular employees will be made redundant.
(3) Consultations under this section shall be initiated at the earliest opportunity and in any event at least 30 days before the first notice of dismissal is givenf
10 – (1) For the purpose of consultations under section 9, the employer concerned shall supply the employees’ representatives with all relevant information relating to the proposed redundancies.
(2) Without prejudice to the generality of subsection (1), information supplied under this section shall include the following, of which details shall be given in writing –
(a) the reasons for the proposed redundancies.
(b) the number, and description of categories, of employees whom it is proposed to make redundant,
(c) the number of employees, and description of categories, normally employed
(cc)
(i) the number (if any) of agency workers to which the protection of Employees (Temporary Agency Work) Act 2012 applies engaged to work for the employer,
(ii) those parts of the employer’s business in which those agency workers are, for the time being, working, and
(iii) the type of work that those agency workers are engaged to do and
(d) the period during which it is proposed to effect the proposed redundancies,
(e) the criteria proposed for the selection of the workers to be made redundant and,
(f) the method of calculating any redundancy payments other than those methods set out in the Redundancy Payments Act 1967 to 2007 or any other relevant enactment for the time being in force or, subject thereto, in practice.
(3) An employer shall as soon as possible supply the minister with copies of all information supplied in writing under subsection (2).
7. It may be noted that this Act was designed to satisfy Ireland’s obligations under Council Directive 98/59/EC on the approximation of the laws of the Member States relating to collective redundancies consolidating earlier directives. The relevant portions of the directive are to be found at section (ii) and section (iii).
Section (ii) Information and Consultation
Article 2(1)
(1) Where an employer is contemplating collective redundancies, he shall begin consultations with the workers’ representatives in good time with a view to reaching an agreement.
(2) These consultations, shall, at least, cover ways and means of avoiding collective redundancies or reducing the number of workers affected, and of mitigating the consequences by recourse to accompanying social measures aimed, inter alia, at aid for redeploying or retraining workers made redundant.
Member States may provide that the workers’ representatives may call on the services of experts in accordance with national legislation and/or practice.
(3) To enable workers’ representations to make constructive proposals, the employers shall in good time during the course of the consultations;
(a) supply them with all relevant information and
(b) in any event notify them in writing of
(i) The reasons for the proposed redundancies;
(ii) The number of categories of workers to be made redundant;
(iii) The number and categories of workers normally employed;
(iv) The period over which the projected redundancies are to be effected;
(v) The criteria proposed for the selection of the workers to be made redundant in so far as national legislation and/or practice confers the power therefore upon the employer and
(vi) The method for calculating any redundancy payments other than those arising out of national legislation and/or practice.
The employer shall forward to the competent public authority a copy of, at least, the elements of the written communication which are provided for in the first subparagraph, point (b), subpoints (i) to (v).
(4) The obligations laid down in paragraphs, 1, 2 and 3 shall apply irrespective of whether the decision regarding collective redundancies is being taken by the employer or by an undertaking controlling the employers
In considering alleged breaches of the information, consultation and notification requirements laid down by this Directive, account shall not be taken of any defence on the part of the employer on the ground that the necessary information has not been provided to the employer by the undertaking which took the decision leading to collective redundancies.
8. Section (iii) deals with the procedures for collective redundancies. It requires employers to notify competent public authorities in writing of any projected collective redundancies. Article 4 provides that projective collective redundancies shall take effect not earlier than 30 days after the notification to the competent public authority.
The decision under appeal
9. The question is whether the consultation process required by the 1977 Act commenced, as it ought to on 8th January, 2009 or whether a breach of section 9 of the 1977 Act occurred by reason of the fact that the respondent made a decision to terminate the employment of the applicant prior to 8th January, 2009, and on that occasion merely communicated a decision already taken, a decision which had been taken in the absence of consultation.
10. The Rights Commissioner had concluded that the specific terms of the individual letters that issued on 8th January, 2009, made it impossible for the employer to comply with section 9.
11. The appeal submitted to the Employment Appeals Tribunal was very specific in contending that the Rights Commissioner had misinterpreted the letters of 8th January, 2009 as a notice of termination of employment, when in fact the letters were no more than an indication to employees of the terms that would apply if they were made redundant. In its determination it recited the opening remarks of counsel for the employer. Of note is that reference is made to the fact that counsel had referred to two cases Junk v. Kühnel (Case C-188/03) [2005] E.C.R. I-855 and also Akavan Erityisalojen Keskusliitto AEK ry v. Fujitsu Siemens Computers Oy (Case C-44/08) [2009] E.C.R. I-8163. Counsel is quoted as saying that the Fujitsu decision “is clear whether it is too early to consult” and “it is also incorrect to conflict the strategic decision and the delivery of a decision”. The comment is added:-
“The point counsel makes from the authorities is that it is clear whether it is too late to consult employees or too early to consult”.
Then, reference is made in the determination in these terms to the submissions that had been made in regard to section 9:-
“The submission is that regarding s. 9 the employer ticks all of the requirements of s. 9.
(1) The employer did not start the consultation too late.
(2) By reference to the Fujitsu case there was no question of the employer having to consult any earlier because of the strategic to migrate was the employer [sic] decision and
(3) There is no prohibition in the employer dismissing employees whilst the consultative process is on-going provided …..The RC [Rights Commissioner] wrongly decided that the employer started to dismiss before consultation”.
I have set out this section of the determination in full and exactly as it appears there as in my view it serves to clarify the operative part of the determination. Thereafter, the appellant’s case (Dell), the respondents’ case and the closing arguments of counsel for the respondent employees are recited.
12. The operative part of the determination, the actual decision is particularly brief. It is convenient to quote it in full.
“Determination
Having heard all the evidence and submissions of the parties, including Mr. G.H. who was self-represented, the Tribunal makes the following Determination.
Regarding S.10 of the Act, the Tribunal upholds the Decision of the Rights Commissioner.
Regarding S. 9 the employer is entitled to make a strategic decision and the Tribunal is satisfied that the meeting of 08th January 2009 was the commencement of this process. The Tribunal unanimously determines that the complaint by the Respondent is not well founded and the appellant employer is not in breach of S. 9 of the Act. Accordingly the Rights Commissioners [sic] decision is upset”.
13. Dell has asserted that the purported appeal to the High Court does not raise any valid point of law arising from adjudication of the EAT. Rather, it is said, that the appellants are seeking a further appeal on the facts, something that is not permissible. Dell contends that the EAT was confronted with the need for a simple factual determination as to whether the communications of 8th January, 2009 constituted a notice of dismissal, and concluded that was not so. While the determination of the EAT may well involve a finding of fact, it seems to me that one cannot lose sight of the fact that the notice of appeal purports to raise issues of law. In particular it is contended by the notice of appeal that the EAT’s interpretation of the requirement for consultation as provided for under section 9 of the Protection of Employment Act 1977, the Protection of Employment Regulations 2000 and the jurisprudence of the European Court of Justice was incorrect in law. More particularly it is contended that the EAT erred in its conclusions as to when the obligation to consult arose. It seems to me that in these circumstances it would not be appropriate to dispose of the appeal in a summary fashion as suggested by Dell. Rather, it is appropriate to identify what was the threshold that the EAT was applying and consider whether that was appropriate. It may nonetheless be the case that on closer examination it will emerge that the determination was in reality a finding of fact and that an appeal does not lie.
The Authorities
14. The question of when the obligation to consult arises has been the subject of a number of decisions of the European Court of Justice (hereinafter “ECJ”) and of the British Courts. So far as the ECJ decisions are concerned the starting point for consideration of this issue is Junk v. Kühnel (Case C-188/03) [2005] E.C.R. I-855. The background to that case was that Mrs. Junk had been employed as a care assistant and domestic carer by a company referred to as A.W.O. On 31st January, 2002 A.W.O. lodged a request for the opening of insolvency proceedings on grounds of financial difficulties. With effect from 1st February, 2002, it released all its employees from the obligation to work and did not pay them any remuneration for January, 2002. On 5th February, 2002, insolvency proceedings were opened, followed on 1st May, 2002, by liquidation proceedings. Mr. Kühnel was appointed liquidator. By letter of the 19th June, 2002, Mr. Kühnel informed the chairman of the works council in the company that because of the closure of the company he intended to terminate all remaining contracts of employment, including that of Mrs. Junk, with effect from 30th September, 2002 and to carry out a collective redundancy. Mrs. Junk submitted before the Arbeitsgericht (or Labour Tribunal) that her redundancy was ineffective. Significantly the Arbeitsgericht pointed out that according to the view which had been dominant in German Law, the provisions applicable in cases of collective redundancies do not refer to the termination of the contracts of employment but to the date on which the workers actually leave the undertaking, that is to say generally on the expiry of their periods of notice of redundancy. The ECJ at paragraph 31 interpreted the first question submitted to it as in substance seeking to ascertain whether Articles 2 and 4 of the directive are to be construed as meaning that the event constituting redundancy consists of the expression by the employer of his intention to put an end of the contract of employment or of the actual cessation of the employment relationship on the expiry of the period in the notice of redundancy.
15. Having referred to certain technical terms that appeared in the German language version of the directive, the ECJ at paragraph 35 observed as follows:
“Next, it must be noted that Article 2(1) of the directive imposes an obligation on the employer to begin consultations with the workers’ representatives in good time in the case where he ‘is contemplating collective redundancies’. Article 3 (1) requires the employer to notify the competent public authority of ‘any projected collective redundancies’.”
The ECJ in the following paragraphs went on to comment as follows:
(36) The case in which the employer ‘is contemplating’ collective redundancies and has drawn up a ‘project’ to that end corresponds to a situation in which no decision has yet been taken. By contrast, the notification to a worker that his or her contract of employment has been terminated is the expression of a decision to sever the employment relationship, and the actual cessation of that relationship on the expiry of the period of notice is no more than the effect of that decision.
(37) Thus, the terms used by the Community legislature indicate that the obligations to consult and to notify arise prior to any decision by the employer to terminate contracts of employment.
(38) Finally, this interpretation is confirmed, in regard to the procedure for consultation of workers’ representatives, by the purpose of the directive, as set out in Article 2(2), which is to avoid terminations of contracts of employment or to reduce the number of such terminations. The achievement of that purpose would be jeopardised if the consultation of workers’ representatives were to be subsequent to the employer’s decision.
(39) The answer to the first question must therefore be that Articles 2 to 4 of the directive must be construed as meaning that the event constituting redundancy consists in the declaration by an employer of his intention to terminate the contract of employment.
16. The ECJ returned to the issue in case Akavan v. Fujitsu Siemens Computers Oy (Case C-44/08) [2009] E.C.R. I–8163. This is the decision that the Employment Appeals Tribunal was referring to as Fujitsu Siemens. For convenience I will adopt the same abbreviation.
17. The background to the matter coming before the ECJ is that following the merger of certain information technology businesses of Fujitsu Limited and Siemens AG into a joint undertaking. The Fujitsu Siemens computer group started trading in October, 1999. FSC was a subsidiary of Fujitsu Siemens Computers (Holdings) BV (the parent company), a company established in the Netherlands. At the time the group had a production plant in Espoo in Finland and a number of plants in Germany.
18. At a meeting held on 7th December, 1999, the executive counsel of the parent company, which consisted of the executive members of its board of directors, decided to make a proposal to the board of directors to dispose of the Espoo facility. At a meeting held a week later, on 14th December, 1999, the board of directors decided to support the proposal, but no specific decision was taken in relation to that factory. On the same day FSC proposed consultations and those took place between 20th December, 1999 and 31st January, 2000. On 1st February, 2000, FSC’s board of directors, mainly consisting of directors of the group and chaired by the deputy chairman of the parent company’s board of directors took a decision to terminate FSC’s operations in Finland with the exception of computer sales. On 8th February, 2000, FSC began making employees redundant. Some employees claimed that FSC had infringed the law on cooperation and commenced proceedings. During the course of those proceedings it was contended on behalf of the employees that a final decision to run down the activities of the Espoo factory and to separate it from the group’s activities before transferring it to Germany had in fact been taken by the parent company’s board of directors by 14th December, 1999 at the latest. According to the employees, the real decisions had been taken on or before the 14th December, before the consultations with the workforce required by law had taken place. When the matter made its way to the Finnish Supreme Court six questions were submitted to the ECJ, the first two of which were as follows:-
(1) Is Article 2(1) of Directive 98/59/EC to be interpreted as meaning that the obligation under that provision to embark on consultations when “contemplating collective redundancies” of employees and “in good time” requires consultations to be started when it is established from strategic decisions or changes that have been made relating to the activity that a need for collective redundancies of employees follows? Or is the provision in question to be interpreted as meaning that the obligation to start consultations already arises on the basis of the employer contemplating measures or changes affecting the activity, such as a change in production capacity or a concentration of production, as a consequence of which a need for collective redundancies is to be expected?
(2) Having regard to the fact that the first subparagraph of Article 2(3) of Directive 98/59 refers to the supply of information in good time during the course of the consultations, is Article 2(1) of [that] directive to be interpreted as meaning that the obligation under that provision to start consultations when “contemplating” collective redundancies and “in good time” requires consultations to be started already before the employer’s intentions have reached the stage at which the employer is required to identify and supply to the employees the information specified in Article 2(3)(b) [of that directive]?
These questions were answered as follows:-
(1) Article 2(1) of Council Directive 98/59/EC of 20th July, 1988 on the approximation of the laws of the Member States relating to collective redundancies must be interpreted to mean that the adoption, within a group of undertakings, of strategic decisions or of changes in activities which compel the employer to contemplate or to plan for collective redundancies gives rise to an obligation on that employer to hold consultations with workers’ representatives.
(2) Whether the obligation has arisen for the employer to start consultations on the collective redundancies contemplated does not depend on whether the employer is already able to supply to the workers’ representatives all the information required in Article 2(3) (b) of Directive 98/59.
The discussion at paragraphs 38 to 49 as to how question 1 was to be answered is of considerable interest. It is convenient to set out those paragraphs which are of particular importance at this stage.
“38. In that regard, it must be recalled that, as is clear from the wording of Articles 2(1) and 3(1) of Directive 98/59, the obligations of consultation and notification imposed on the employer come into being prior to the employer’s decision to terminate employment contracts (see, to that effect Case C-188/03 Junk [2005] ECR I-885 paragraphs 36 and 37). In such a case there is a still a possibility of avoiding or at least reducing collective redundancies, or of mitigating the consequences.
39. Under Article 2(1) of Directive 98/59, the employer has the obligation to start consultations with the workers’ representatives in good time if he is “contemplating collective redundancies”. As stated by the Advocate General in points 48 and 49 of his Opinion, it is clear from comparison of various language versions of that provision that the Community legislature envisaged that the obligation at issue to hold consultations would arise in connection with the existence of an intention on the part of the employer to make collective redundancies.
40. The references in Articles 3 and 4 of Directive 98/59 to “projected” collected redundancies confirm that the existence of such an intention is the factor which triggers the obligations laid down by that directive, in particular by Article 2.
41. It follows that the obligation to hold consultations laid down in Article 2 of Directive 98/59 is deemed to arise where the employer is contemplating collective redundancies or is drawing up a plan for collective redundancies (see, to that effect, Case 284/83 Dansk Metalarbejderforbund and Specialarbejderforbundet i Danmark [1985] ECR 553, paragraph 17).
42. It must however be added that, as is clear from the actual wording, the obligations laid down by Directive 98/59, in particular the obligation to hold consultations laid down in Article 2, are also triggered in situations where the prospect of collective redundancies is not directly the choice of the employer.
43. Under Article 2(4) of that directive, the employer is responsible for compliance with the information and consultation requirements stemming from that directive, even if the decision on collective redundancies is made not by the employer, but by the undertaking controlling the employer, and even though the employer may not have been immediately and properly informed of that decision.
44. Against an economic background marked by the increasing presence of groups of undertakings, that provision serves to ensure, where one undertaking is controlled by another, that the purpose of Directive 98/59, which, as is stated in recital 2 of its preamble, seeks to promote greater protection for workers in the event of collective redundancies, is actually achieved (Case C 270/05 Athinaïki Chartopoiïa [2007] ECR I 1499, paragraph 25).
45. Moreover, as the United Kingdom Government rightly observes, a premature triggering of the obligation to hold consultations could lead to results contrary to the purpose of Directive 98/59, such as restricting the flexibility available to undertakings when restructuring, creating heavier administrative burdens and causing unnecessary uncertainty for workers about the safety of their jobs.
46. Lastly, the raison d’être and effectiveness of consultations with the workers’ representatives presuppose that the factors to be taken into account in the course of those consultations have been determined, given that it is impossible to undertake consultations in a manner which is appropriate and consistent with their objectives when there has been no definition of the factors which are of relevance with regard to the collective redundancies contemplated. Those objectives are, under Article 2(2) of Directive 98/59, to avoid termination of employment contracts or to reduce the number of workers affected, and to mitigate the consequences (see Junk, paragraph 38). However, where a decision deemed likely to lead to collective redundancies is merely contemplated and where, accordingly, such collective redundancies are only a probability and the relevant factors for the consultations are not known, those objectives cannot be achieved.
47. On the other hand, it is clear that to draw a link between the requirement to hold consultations arising under Article 2 of Directive 98/59 and the adoption of a strategic or commercial decision which makes the collective redundancies of workers necessary may deprive that requirement, in part, of its effectiveness. As is clear from the first subparagraph of that Article 2(2), the consultations must cover, inter alia, the possibility of avoiding or reducing the collective redundancies contemplated. A consultation which began when a decision making such collective redundancies necessary had already been taken could not usefully involve any examination of conceivable alternatives with the aim of avoiding them.
48. It must therefore be held that, in circumstances such as those of the case in the main proceedings, the consultation procedure must be started by the employer once a strategic or commercial decision compelling him to contemplate or to plan for collective redundancies has been taken.
49. In those circumstances, the answer to be given to the first question referred is that Article 2(1) of Directive 98/59 must be interpreted to mean that the adoption, within a group of undertakings, of strategic decisions or of changes in activities which compel the employer to contemplate or to plan for collective redundancies gives rise to an obligation on that employer to consult with workers’ representatives.
19. The reference in the judgment with apparent approval to the arguments that had been advanced on behalf of the government of the United Kingdom about the dangers of premature consultation is instructive. I have discussed the approach taken by the ECJ in the Fujitsu Siemens case at some length because it seems to me that the EAT was seeking to apply this decision when it reached the conclusion that it did. It is for this reason that I have referred to the recital of the arguments of counsel for the employer in the body of the determination.
20. Still greater clarity, if that was required, might have been provided by United States of America v. Christine Nolan (Case C-583/10) (Judgment of the Court, Third Chamber, of 18th October, 2012) but unfortunately the ECJ, faced with the very unusual situation of a dispute involving a civilian employee working at US air force base in Britain, concluded that it did not have jurisdiction to reply to questions which had been submitted to it by the Court of Appeal.
21. The factual background to that case could hardly have been more unusual and indeed the notion of a sovereign government engaging in consultation before closing a military base for strategic reasons raises eyebrows. However, what is of interest is that the United States argued by reference to the Fujitsu Siemens case that the consultation obligation was not triggered by a proposed business decision to close a plant, but that the consultation obligation only arose at a later stage when the business decision had already been made and the intention to make the employer redundant had been formed. In a situation where it was clear that if the interpretation being placed on the ECJ decision in Fujitsu Siemens was correct that this meant that a decision of a divisional court in R. v. British Coal Corporation and Secretary of State for Trade and Industry ex parte Vardy and ors [1993] IRLR 104 had been wrongly decided, the Court of Appeal decided to submit certain questions to the ECJ. By way of further background it should be noted that in the Nolan case the EAT had found against the government of the United States. In doing so it was following a decision of the EAT in UK Coal Mining Limited v. National Union of Mineworkers (Northumberland Area) [2008] IRLR 4 which had held that the consultation obligation arose when the mine closure was proposed, or at least when it was contemplated that the closure would give rise to redundancies and that the consultation should concern the reasons for the closure. That decision, it may be noted, was departing from earlier EAT decisions such as Middlesbrough Borough Council v. Transport and General Workers Union [2002] IRLR 332 and Securicor Omega Express v. G.M.B. [2004] IRLR 9. The Court of Appeal in Nolan ([2010] EWCA Civ 1223) felt that the interpretation of the ECJ decision in Fujitsu Siemens was not straightforward. In the course of its consideration the Court of Appeal quoted the first question that had been referred by the Finnish Supreme Court. I referred to that question earlier but it is convenient to set it out once more and to do so as the Court of Appeal did. The question was as follows:-
“Is Article 2(1) of Directive 98/59… to be interpreted as meaning that the obligation under the provision to embark on consultations when “contemplating collective redundancies” of employees and “in good time” requires consultations to be started when it is established from the strategic decisions or changes that have been made relating to the activity that a need for collective redundancies of employees follows? Or is the provision in question to be interpreted as meaning that the obligation to start consultations already arises on the basis of the employer contemplating measures or changes affecting the activity, such as change in production or concentration of production, as a consequence of which a need for collective redundancies is to be expected.” (Emphasis as provided by the Court of Appeal).
The Court of Appeal then put the Finnish question in the context of its domestic jurisprudence and suggested that the first sub question was asking whether the approach in Middlesbrough and Securicor was correct while the second sub question was asking whether the UK Coal Mining line of authority was correct.
22. The Court of Appeal then went on to conduct a forensic analysis of the opinion of the Advocate General and then of the judgment of the ECJ. The Court of Appeal commented that they had to say with respect that they found the reasoning of the Advocate General quite difficult to follow and that they did not find the interpretation of the ECJ’s decision on the first question straightforward. The Court of Appeal having conducted that exercise commented that it proposed to venture no further views on the true interpretation of the judgment which it respectfully regarded as unclear. While not spelled out by the Court of Appeal it does seem to me implicit in its judgment that the Court was of the view that as between the two options offered, option 1 being that the obligation arose when the employer was proposing, but had not yet made, a strategic business or operational decision that will foreseeably or inevitably lead to collective redundancies and option 2 that the obligation arose only when that decision had actually been made and the employer was then proposing consequential redundancies, that option 2 was more likely the correct interpretation but that the matter was sufficiently uncertain that a reference was appropriate.
23. In a situation where the Court of Appeal has expressed the view that the decision of the ECJ is unclear, I have to give serious consideration to the question of whether a reference is necessary. In particular, I must think long and hard if the matter is not to be referred, given that by virtue of Terms of Employment (Information) Act, 1994 there is no appeal from my decision.
24. I have paid particular attention to the opinion of Advocate General Mengozzi in United States of America v. Nolan given that he was also the Advocate General in the Fujitsu Siemens case his opinion is particularly influential. He felt that the European Court of Justice was being asked to determine the trigger point for the employer’s obligation of prior consultation in the case of collective redundancy and more specifically that the referring court was uncertain whether that obligation arose when the employer was planning to make a strategic or operational decision which, foreseeably or inevitably, will lead to collective redundancies or only when that decision had actually been made and the employer is planning to proceed with the consequential redundancies. As between the position argued for by Mrs. Nolan which was that only the first possibility ensured the effectiveness of the directive and the position adopted by the Commission and the EFTA Surveillance Authority who argued that in light of Fujitsu Siemens and the facts of the case of the referring court that the employer’s obligation to begin consultations concerning collective redundancies arises when a strategic or commercial decision is taken which compels the employer to contemplate or to plan collective redundancies, the Advocate General indicated that he agreed with the interpretation contended for by the Commission and the EFTA Surveillance Authority. His subsequent analysis shows clearly the extent to which this was an area where facts had to be found and where he saw this as the critical exercise to be undertaken. He observed, at paragraph 49,:-
“In my view, the method to be used by the referring court should be to identify which of the events mentioned in the order for reference which occurred before 5th June 2006 was in the nature of a strategic decision and exerted compelling force on the employer for the purposes of giving effect to the consultation obligation, and the date on which that decision was made.”
25. Returning then to the decision of the Employment Appeals Tribunal in the present case it does seem to me that the determination approached the controversy before it as essentially one of fact and decided as a matter of fact that the communication by Dell on 8th January, 2009 did not constitute notice of dismissal and that the employer had commenced the consultation process at an appropriate stage. It seems to me that the reference to the entitlement of the employer to make a strategic decision in the concluding paragraph of the determination must mean that the Employment Appeals Tribunal was taking the view that the employer had, as it was obliged to do, embarked on consultation when a strategic or commercial decision compelling it to contemplate or plan for collective redundancies had been taken. If one looks at what happened subsequent to 8th January, 2009, further evidence emerges that the letters of 8th January, 2009 were not simply the communication of what was a fait accompli. Many of the matters of substance contained in the letter of 8th January changed between that date and the end of the consultation period on 27th March. A number of employees were redeployed and as a result their employment was never terminated, the actual leaving dates for several production lines were different from the dates suggested in the initial letters and there was a significant improvement in the severance package available to employees.
26. Further support for the view that what emerged on 8th January, 2009, was not the communication of a finalised decision is to be found in the text of the letter of 8th January itself. The letter contains a specific statement that the content of the letter is for information purposes only and does not constitute contractual terms or conditions. The section on “Leaving Dates” refers to estimated ranges of leaving dates associated with individual production lines. Again, the section on severance payments refers to estimated severance payments and stresses that the calculations set out are estimates only. However, I do acknowledge that the letter contains a significant amount of detail and certainly does not suggest that the employer has an open mind, or that the employees are being provided with a blank sheet. However, it seems to me one has to recognise that a communication couched in generalities would be of little assistance to employees, and would likely be not well received.
27. In these circumstances I do not believe that a point of law has been identified which would provide a basis for overturning the decision of the Employment Appeals Tribunal and accordingly I dismiss the appeal.
