Olsten (UK) Holdings Ltd v Adecco Group European Works Council

JurisdictionEngland & Wales
JudgeLady Justice Simler,Lord Justice Dingemans,Lady Justice Whipple
Judgment Date26 July 2023
Neutral Citation[2023] EWCA Civ 883
CourtCourt of Appeal (Civil Division)
Year2023
Docket NumberCase No: CA 2023 000015
Between:
Olsten (UK) Holdings Limited
Appellant
and
Adecco Group European Works Council
Respondent

[2023] EWCA Civ 883

Before:

Lady Justice Simler

Lord Justice Dingemans

and

Lady Justice Whipple

Case No: CA 2023 000015

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

THE HONOURABLE MR JUSTICE KERR

EAT [2022] 183

Royal Courts of Justice

Strand, London, WC2A 2LL

Andrew Burns KC and Sam Way (instructed by Lewis Silkin LLP) for the Appellant

Richard O'Dair (instructed by EWC Legal Advisers) for the Respondent

Hearing dates: 13 June 2023

Approved Judgment

This judgment was handed down remotely at 10.30am on 26 July 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Lady Justice Simler

Introduction

1

This appeal concerns the meaning and scope of an agreement setting up a European Works Council, and in particular, the scope of the obligation to convene an extraordinary meeting to inform and consult employee representatives.

2

The principal question to be determined is the meaning and extent of the following obligation set out at clause V.1.4 of the agreement between the parties to this appeal:

“Extraordinary Meetings will be convened to provide Information and engage in Dialogue with the Steering Group on the following transnational Issues where exceptional circumstances or decisions arise:

a) …

b) in the event of collective redundancies which significantly affect existing Adecco Employees in each of at least two EEA countries in which Adecco has employees.”

3

The question arises against a background of legislation, both domestic and European Union (“EU”), that provides for a structured mechanism for large and medium sized employers to inform and consult employees on matters of exclusively local or national concern if their employees require it: see the Information and Consultation of Employees Regulations 2004 which implemented the EU Information and Consultation Directive 2002/14/EC. Until 31 December 2020, by virtue of EU Directive 2009/38/EC (implemented by the Transnational Information and Consultation of Employees Regulations 1999 (as amended) (the “1999 Regulations”)), a UK based multinational enterprise of “Community-scale” (employing 1,000 or more employees with at least 150 employees in each of at least two EU or European Economic Area (“EEA”) countries) was required upon request to (or could at its own volition) establish a European Works Council (an “EWC” or committee of the representatives of the employees) or some other suitable procedure for consulting its employees at a transnational level about matters of transnational concern significantly affecting the interests of the workers. For all material purposes, the 1999 Regulations continue to apply because they continue to apply to complaints made before 31 December 2020 (see paragraph 41 of schedule 2 of the Employment Rights (Amendment) (EU Exit) Regulations 2019).

4

The Adecco Group AG, based in Zürich, Switzerland, is a global provider of HR solutions and the placement of temporary workers, through subsidiary companies owned by it. It is the ultimate parent company of the appellant, Olsten (UK) Holdings Ltd (who I shall refer to as “Adecco”). At all material times, Adecco was the Adecco Group AG's representative agent appointed to represent it for the purposes of its functions under Directive 2009/38/EC (“the Directive”).

5

On 24 May 2018, Adecco and the respondent agreed an amended and restated Adecco Group European Works Council agreement (“the Agreement”) which replaced an earlier agreement dated 11 December 2013. Between 2019 and June 2020, collective redundancy consultation processes in Adecco Group subsidiaries were commenced in four European states: Hungary, the Netherlands, Sweden and Germany. Following correspondence to which I shall return below, the respondent made a complaint dated 24 November 2020, to the Central Arbitration Committee (“the CAC”) under regulation 21 of the 1999 Regulations, alleging (among other things) that Adecco had failed to inform and consult the respondent about collective redundancies in at least two countries within the scope of the Agreement, including by failing to convene an “Extraordinary Meeting” to provide such information in breach of clause V.1.4 of the Agreement.

6

The CAC Panel appointed to hear the complaint (“the CAC Panel”) upheld it in part (relating to Sweden and Germany only). Adecco appealed to the Employment Appeal Tribunal (“EAT”), contending so far as material to the present appeal, that the CAC Panel had misinterpreted the scope of a “transnational matter” triggering the obligation to convene an Extraordinary Meeting to discuss proposed collective redundancies. As well as resisting the appeal, the respondent applied to the EAT under regulation 21(6) of the 1999 Regulations for a penalty notice to be issued against Adecco in respect of the failure of the Adecco Group AG to comply with its obligations under the Agreement (among other things) by failing to convene an Extraordinary Meeting to provide information and engage in dialogue about collective redundancies.

7

The appeal was heard by Kerr J in the EAT, whose judgment dated 13 December 2022 is reported as [2022] EAT 183. The EAT dismissed Adecco's appeal. The judge issued a penalty notice assessed at £20,000 for the failure from 27 May 2020, when the respondent's steering group requested an Extraordinary Meeting to the last of the relevant notices of dismissal (given in Germany) on 24 September 2020, at which point the failure ceased to have any operational impact because it was by then too late to engage in a dialogue to avert redundancies.

8

The single ground of appeal pursued by Adecco in this court is that the CAC Panel misdirected itself or misinterpreted the meaning of a “transnational matter” when construing clause V.1.4 of the Agreement, and was wrong to hold that it was irrelevant whether the Swedish and German redundancy proposals had been “separately formulated in different countries in light of unrelated national circumstances” and sufficient that there were two such proposals in two countries at about the same time. Mr Burns KC contends on behalf of Adecco that to be transnational for these purposes, a matter must concern or have potential effects in at least two different countries. Where, as he submitted here, the relevant decisions were taken locally, one in Sweden and one in Germany for reasons particular to each of those countries, unconnected with each other and not dictated by the central management of Adecco Group AG in Switzerland, the redundancy proposals were not transnational and did not trigger the requirement to convene an Extraordinary Meeting.

9

For the respondent, Mr O'Dair advanced textual and purposive arguments in support of the approach adopted by the tribunals below. He submitted that on a natural reading of clause V.1.4 (b), the events giving rise to this dispute count as transnational, and he relied in particular on the introductory words “the following transnational Issues”, which make it clear that the events or matters that follow are transnational. He submitted that Adecco's approach overlooks the importance of certainty and effectiveness. He accepted that the construction adopted by the EAT means that there will be occasions, as he put it in writing, “when the reach of the Directive would be over broad given its purposes. But it is not uncommon for legal rules to be broader than strictly necessary for the attainment of their purposes i.e. in order to ensure effectiveness and ease of application”. He submitted that the example identified by the EAT of the unrelated factory fire in Bulgaria and the earthquake in Portugal both leading separately to redundancies and nonetheless requiring an Extraordinary Meeting to be called, is an invitation to use a hard case to make bad law.

The legal framework

10

The Directive made changes to the regime established by its predecessor, Directive 94/45/EC, to provide clarity (recital 1) while preserving its rationale: to ensure that where an undertaking or group of undertakings operate in multiple states of the EU or EEA, employees' representatives are informed and consulted upon matters affecting them decided or to be decided in a state other than that in which they are employed.

11

The Directive has 49 recitals which together reflect its purpose. The recitals are not legally binding, but are an aid to interpretation. Thus, recital (7) recognises the need to modernise the legislation on transnational information and consultation with a view to ensuring the effectiveness of these rights while at the same time remedying the lack of legal certainty resulting from some of the predecessor provisions. The burden on undertakings and establishments is also to be kept to a minimum while ensuring the effective exercise of the rights granted (recital (9)).

12

Against that background, recital (10) recognises that the functioning of the internal market involves various processes, including cross-border mergers, take-overs and joint ventures that lead to the “transnationalisation” of businesses, and that in order to develop harmoniously, those businesses operating in two or more member states must inform and consult representatives of those of their employees who are affected by their decisions.

13

Recital (11) explains that procedures for informing and consulting employees “are often not geared to the transnational structure of the entity which takes the decisions affecting those employees”, and this may lead to “the unequal treatment of employees affected by decisions within one and the same undertaking or group”. Appropriate measures were therefore regarded as necessary to ensure that affected employees are “properly informed and consulted when decisions which affect them are...

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