Establishment figure

A judgment involving a school teaches us the meaning of “establishment”. Phil Allen analyses the ruling.

The onerous rules on collective redundancy consultation apply where you are proposing twenty or more redundancies in ninety days at one establishment. But what does an establishment mean? Is it your local office/branch, your region/network, or your whole national operation?

The Employment Appeal Tribunal have held that a single school is capable of being an establishment in Renfrewshire Council v The Educational Institute of Scotland, overturning the Tribunal’s decision that it was the whole education and leisure service of the council. This decision is helpful for employers as it potentially narrows down when collective consultation obligations will apply.

The detail

Some teachers alleged that the council had failed to collectively consult on proposed redundancies. A preliminary hearing needed to decide whether each school was a separate establishment or whether this should be a larger operation such as the council as a whole. If it was each school, there were less than twenty proposed redundancies at each one so the collective consultation rules would not apply. The Employment Judge allowed the claims to proceed, because she held that the establishment was the entire education and leisure service of the council. On appeal that has been overturned and the EAT have held that the establishment could be the school only.

Helpfully the EAT have highlighted that an establishment is likely in most cases to be less than the whole undertaking of the employer (otherwise the law wouldn’t contain the distinction). They have stated that this test looks more at physical presence than organisational operation. UK redundancy law focuses on an employee’s place of work and this decision supports the view of an establishment being a local work unit irrespective of whether that unit has limited involvement in negotiating terms or determining the use of allocated budget. Schools do have a degree of autonomy which is necessary for any site to be an establishment, but the EAT’s decision makes clear that it did not matter that the central county-wide body retained much of the control over recruitment and dismissal.

The EAT also considered whether mobility clauses in employment contracts undermine the separateness of each establishment. The argument was that because staff could contractually be moved to other schools that meant the establishment could not be just the school. The EAT did not accept this at all and said that the unit to which an employee was assigned was to be determined factually not contractually. That is it was where they were actually based for more than a purely temporary or transitory period, not where they could be required to work. Whilst moving staff around between sites can be relevant to whether each one is a separate establishment, the existence of an un-used contractual power is not.

What does this mean for me?

If you are proposing redundancies it is very important to ensure that the number is below twenty where you do not wish to follow the full collective consultation process, and below one hundred if the onerous requirement to collectively consult for ninety days is to be avoided. Who you count can be key, particularly where the number may be close. Which unit of your operation must count will vary based upon your own operational and geographic set up. This decision is helpful in that it focuses more upon geography and separate units. It makes it more likely that the onerous obligations can be avoided, although it should be considered and applied with care (and advice). However, if you are a large organisation which includes smaller sites or operations, this decision strongly supports a view that those sites can be a separate establishment. This means the obligation to collectively consult (as well as the requirement to notify the Government using the HR1 form) is less likely to apply.

Comment

If you asked a teacher where they worked they would probably say the particular school. This decision supports a common-sense view of establishment. When considering your staff this is as good a test as any - would they say they worked at your specific operation, site or business unit? If trying to restrict the size of your establishments in the future to avoid onerous consultation obligations or the need for collective representation, think about the breakdown of your operation and how staff would define the part of the business to which they are allocated. You can take steps to increase the likelihood of your organisation having separate establishments, particularly if geographically split. This decision increases the likelihood that such steps can succeed.

Phil Allen is a partner at Weightmans. He can be contacted on 0161 214 0504 or by This email address is being protected from spambots. You need JavaScript enabled to view it..