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Collective consultation: advice for employers on large scale redundancies
Large scale redundancies have featured in the news on a regular basis this year with employers continuing to feel the lingering impact of the Covid-19 pandemic, together with drastically altered trading conditions as a result of Brexit.
You may recall P&O dismissing 800 workers in circumstances which appeared to contravene numerous laws relating to unfair dismissal and collective consultation on redundancies. More recently, TM Lewin, the former high street clothing retailer, was involved in a number of Employment Tribunal cases where the Tribunal was asked to consider whether the company, in dealing with redundancies during the height of the pandemic, should have consulted collectively in accordance with section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (the Act).
Both of the cases mentioned above highlight some of the issues arising from collective redundancies and also that the duty to consult collectively applies not only to redundancy dismissals.
What are the rules around collective redundancies?
The starting point for any employer is to identify whether a potential redundancy situation exists. Having done so, the employer needs to consider which employees are affected by that potential redundancy situation. This is not only for the purpose of working out which employees may fall within the pool for selection for redundancy but it is necessary in order to establish whether a collective redundancy situation exists.
When do the rules apply?
The duty to consult collectively arises where the employer proposes to dismiss, as redundant, 20 or more employees at one establishment within a period of 90 days.
The 20 employee threshold may come as a surprise to some employers. We are used to hearing about negotiations between the unions and employers where large numbers of jobs are at risk but many smaller employers could be subject to the requirements too.
Seven key considerations
We have set out below some considerations that employers should bear in mind when undertaking collective redundancies.
- What amounts to an “establishment” has been the subject of many a Tribunal case over the years. Establishment does not always mean simply one place of work. It can cover a distinct entity which, amongst other matters, has its employees based in different places.
- Having established that the duty to consult collectively is engaged, the employer is then required to consult with the appropriate union or workplace body. If neither is already in place, the employer must make arrangements for affected employees to elect representatives to consult on their behalf.
- The employer must consult directly with the representatives. The process can be long and complicated. Where the employer proposes to dismiss 20 to 99 employees within a 90 day period, there must be 30 days before the first of any dismissals takes effect. Where the employer is looking to dismiss 100 or more employees, there must be 45 days before the first dismissal takes effect. Those timescales apply even if the consultation does not take that long.
- The requirement to consult collectively arises not just in relation to redundancies. It also applies where the employer proposes to terminate contracts of employment (and therefore dismiss affected employees) and offer re-engagement on revised terms and conditions. It is very much the same process as with redundancies.
- When dismissing employees as part of a collective exercise, the employer will need to inform the Insolvency Service’s Redundancy Payments Service by submitting form HR1. Failure to submit the form is a criminal offence and can lead to a fine (there is no cap on any fine).
- The financial exposure for employers is much more significant if they do not comply with their obligations to consult collectively. Any breach could give rise to an Employment Tribunal claim under which a protective award of 90 days’ gross pay can be made – that is 90 days’ gross pay per employee. The liability arises even where any breach is technical, although it is open to the Tribunal to reduce an award subject to the seriousness of any breach.
- It is possible to defend a Tribunal claim for failure to consult collectively on the basis that there were special circumstances which rendered it not reasonably practicable for the employer to have complied with the duty. The employer would also have to show that it still took such steps as were possible to inform and consult. What falls under special circumstances is not defined by law but given the case law on this, there must be a truly unforeseen event for the employer not to have been able to consult. Insolvency, for example, is not an unforeseen event on its own. Perhaps unsurprisingly, the special circumstances defence is difficult to establish.
The above is just a snapshot of the law on collective consultation. It is by no means a comprehensive review of matters nor does it amount to legal advice. Each case turns on its own facts.