December 31, 2015

EU Update: Definition of "Redundancy" Extended for Purposes of Collective Redundancy

In Pujante Rivera v Gestora Clubs Dir SL and another (C-422/14), the European Court of Justice (ECJ) considered whether a resignation resulting from an employer's unilateral change to an employee's contract of employment should be treated as a "redundancy" for the purposes of European collective redundancy legislation.

The main issue in this case was whether an employee's resignation in response to their employer's unilateral reduction of their salary by 25 percent amounted to a "redundancy" for the purposes of collective redundancy under EU law. The ECJ held the definition of "redundancy" should include resignations, such as this one, which resulted from an employer's unilateral, significant and detrimental change to an employee's contract. As such, these resignations should be taken into account when considering whether the headcount threshold triggering collective redundancy consultation has been met. (In the U.K., collective consultation obligations are triggered where an employer proposes to make 20 or more "redundancies" at one establishment within a period of 90 days or less.)

While it has long been established that the scope of "redundancy" under EU law has always been wider than the normal meaning of redundancy (and includes, for example, changing employees' terms and conditions through termination and re-engagement), this decision extends the definition to resignations where an employer makes unilateral, significant and detrimental changes to an employee's terms and conditions. This will need to be borne in mind by employers contemplating large scale redundancies and restructures.

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