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Collective Redundancies

Caroline Batko

If an EMPLOYER proposes to MAKE 20 OR MORE EMPLOYEES REDUNDANT at ‘ONE ESTABLISHMENT’, WITHIN 90 DAYS, then legal requirements on COLLECTIVE CONSULTATION will apply.

Voluntary redundancies and redeployment will count toward the calculation of the number of employees to be made redundant, as will any redundancy processes already commenced.

From 6th April 2013, the collective consultation period for making 100 or more employees redundant at one establishment reduced from 90 days to 45 days (The Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment) Order 2013). The aim is to provide businesses with greater flexibility and control in re-organisation.

Establishment

The definition of an ‘establishment’ for the purposes of collective consultation is not a straightforward one. Employers may need to take legal advice if they are unsure as to the implications of dismissing in excess of 20 employees across the business as a whole. The available guidance states that whether the redundancies are at ONE ESTABLISHMENT is a question of fact having regard to the employee’s contract, geographical location, management structure and numerous other factors.

The employer should CONSULT with any recognised trade union or, in the absence of union membership, with ELECTED employee representatives. Employee representatives can volunteer or be elected by employees through a proper process. Employee representatives acquire rights by virtue of their position, for example, the right to time off to perform their role.

The consultation should start at least 30 days (if between 20 and 99 employees are to be made redundant) or 45 days (if over 100 employees to be made redundant) before the first dismissal takes place. The length of consultation is not otherwise stipulated.

Employers should carry out a balancing exercise when considering how long the period of consultation should be. On the one hand, employees should have adequate warning of impending reductions in the workforce (with a view to allowing those affected to consider their future employment options) and on the other hand, the process ought not to be too unnecessarily drawn out so as to avoid additional stress and employee morale issues. It is a stressful time for employee and employer when redundancies are going to be made.

The Consultation

This should include discussion with employees about ways to avoid redundancy. The duty to consult applies even in voluntary redundancy situations. Employers should consult fully about the redundancy process with those employees, who will be involved in that process and the ways of reducing the effect on employees.

Consultation should not be treated as just be a formality in order to comply with the legal requirements. It should be meaningful. In fact, meaningful consultations often benefit the business as new ideas and proposals are raised by employees that were perhaps not previously considered.

Ways to avoid compulsory redundancy could include offering voluntary packages, or agreeing with employees a reduction in hours or pay. This latter would have to be with the consent of the employee otherwise the employer could face claims for breach of contract and/ or constructive dismissal. Some degree of formality to record variation of contractual terms must be observed by the employer and in certain situations a full compromise of rights agreement may be thought necessary.

Redundancy Selection

The employer should also provide written disclosure concerning the proposed collective redundancy to trade union representatives or employee representatives, as appropriate. This should include the reasons for the redundancy proposals, the number and class of employees affected, the likely time periods involved and the process and the method for calculating redundancy and any applicable contractual payments. It is also sensible to explain the process by which REDUNDANCY SELECTION will take place.

The employer should also notify the Secretary of State for Business Innovation and Skills at least 30 days (if between 20 and 99 employees are to be made redundant) or 45 days (if over 100 employees are to be made redundant) before the first dismissal takes place.

An employer should not issue any notice of redundancy until the consultation has been properly completed and no dismissal shall take effect until the minimum consultation period expires.

A failure to consult in accordance with the legal requirements may result in an Employment Tribunal awarding the employee compensation in the form of a ‘protective award’. Such an award would be based on each employee’s normal week’s pay, up to a maximum of 90 days, at the Tribunal’s discretion. This is a very significant reason to get things right.

In addition, the failure to follow a reasonable procedure for Redundancy and in particular REDUNDANCY SELECTION – could lead to employees making claims of unfair dismissal. The usual rules for unfair dismissal would apply in relation to redundancy as they do to any other manner of dismissal. The employee has the right not to be unfairly dismissed and Redundancy is only a prima facie fair reason to dismiss. It has to be carried out properly.

It is recommended that employers have in place a procedure to follow for collective redundancies. This can make the process simpler and provide the employees with a better understanding.

As above, the change to the law on collective consultation for redundancy came into force on 6th April 2013. Transitional arrangements mean that if the collective redundancy commenced prior to this date then the consultation must begin at least 90 days before the first dismissal.

Please note that the above is a brief overview only. For further advice please contact cab@wdavies.com.

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