Usdaw & Anor v Ethel Austin Ltd & Ors

The Court of Appeal considered whether national law implementing Directive 98/59/EC on collective redundancies (in particular section 188 of the Trade Union and Labour Relations Consolidation Act 1992) gives full effect to the Directive's definition of collective redundancies and whether questions of construction should be referred to the Court of Justice of the European Union under Article 267. The EAT had held that section 188 did not give full effect to the Directive and had read out the words "at one establishment" to permit aggregation across establishments; that decision was under challenge on appeal.

The court decided not to determine the appeal on the merits but to make a reference under Article 267 to the CJEU on (i) the construction of Directive 98/59/EC as to aggregation between establishments and (ii) whether the "vertical direct effect" of the Directive could be relied upon against the state in these proceedings. The court's reasons were that the pending CJEU reference in Lyttle v Bluebird already involved the same point but lacked direct representation of employee interests, and that the vertical direct effect question was not before the CJEU in Lyttle and was necessary to enable the domestic court to give judgment.

Background and parties: The appeals arose from collective redundancy claims made by members of the trade union USDAW following insolvency and administration of large retail chains including Ethel Austin. A number of employees sought protective awards on the basis that there had been no consultation under section 188 of the Trade Union and Labour Relations Consolidation Act 1992. At employment tribunal level employees working in shops with 20 or more employees succeeded, while those in shops with fewer than 20 failed. The Employment Appeal Tribunal reversed in part, holding that section 188 did not give full effect to Directive 98/59/EC and allowing aggregation across establishments.

Procedural posture: The Secretary of State was granted permission by the EAT to appeal to this court. Unknown to the parties, on 12 April 2013 an industrial tribunal in Northern Ireland had referred questions to the CJEU in Lyttle v Bluebird. The EAT decision under appeal was dated 30 May 2013. The Court of Appeal had to decide whether to stay proceedings pending the CJEU decision in Lyttle or to make its own reference under Article 267.

Nature of the claim and relief sought: Claimants sought protective awards for failure to consult before dismissal as redundant under domestic law implementing Directive 98/59/EC; a successful claim could expose the Secretary of State to liability in respect of protective awards ultimately under the Employment Rights Act 1996.

Issues framed: (i) Whether section 188 TULRCA 1992 gives full effect to Directive 98/59/EC or whether aggregation between establishments is permitted, (ii) whether the domestic court should refer questions of EU law to the CJEU under Article 267, and (iii) whether the Directive has vertical direct effect such that the Secretary of State could be liable in domestic proceedings for a failure to implement the Directive.

Court's reasoning and decision: Applying the 'necessary to enable' test for an Article 267 reference, the court concluded that a reference should be made rather than staying the appeals. Two principal reasons were given: first, the Lyttle reference did not include direct representation of employee interests and the CJEU might be assisted by written and oral submissions representing those interests; second, the question of vertical direct effect was not before the CJEU in Lyttle but might be necessary to resolve aspects of these domestic appeals. The court therefore made a reference on the construction of the Directive and the vertical direct effect point and gave directions for expedited transcripts and for submission of draft orders and the draft reference.

The Court did not decide the substantive appeal. Instead it made a reference under Article 267 TFEU to the Court of Justice of the European Union on (i) the construction of Directive 98/59/EC concerning aggregation between establishments and (ii) whether the Directive has vertical direct effect such that the Secretary of State can be relied on in domestic proceedings. The rationale was that the pending CJEU proceedings in Lyttle lacked direct employee representation and that the vertical direct effect point, which could be necessary to enable the domestic court to give judgment, was not before the CJEU in Lyttle.

On appeal from the Employment Appeal Tribunal (EAT judgment dated 30 May 2013). The EAT had held that section 188 TULRCA 1992 did not give full effect to Directive 98/59/EC and permitted aggregation between establishments. An industrial tribunal in Northern Ireland had earlier referred questions to the CJEU in Lyttle v Bluebird on 12 April 2013. The Secretary of State was granted permission by the EAT to appeal; this Court referred questions to the CJEU rather than determining the appeal on the merits.