If the gloomy forecasts of the CBI are accurate there will soon be few in the business community untouched by redundancy. Almost always a personal misfortune, redundancy also has serious implications for management of a business. From the position of supporting and motivating staff, businesses have to move to the position where their own decision blights the financial situation of that individual. Business efficiency must be maximised by wise selection of who leaves and legal minefields must be crossed in carrying out a legally safe redundancy dismissal. Perhaps the greatest management challenge is preserving the motivation and goodwill of the remaining workforce in a redundancy situation.
As the downturn escalates, larger businesses are affected and larger numbers of employees may need to be dismissed. An additional higher hurdle may face management, as legal obligations concerning collective redundancy consultation and notification of employees have to be dealt with or the business may face deliberately punitive protective award payments.
In brief, if an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less they must:-
1. Consult the appropriate representatives of the employees affected by the redundancy; and
2. Notify the Department for Business, Enterprise and Regulatory Reform.
If there are 20 or more employees then there must be consultation at least 30 days before the first dismissal takes effect
Where a 100 or more redundancies are proposed at one establishment within a 90 day period, there must be at least 90 days of such consultation before the first of the dismissals takes effect.
Consultation must begin “in good time” and must in any event begin before the above time limits. Consultation must be with appropriate representatives, which will be a Trades Union recognised by the employer in respect of the employees at risk if there is no such a Trades Union. Otherwise the employer can choose to consult existing appropriate elected employee representatives or employee representatives specially elected for the purposes of redundancy consultation. There are of course rules to follow on how employee representatives are elected.
For the purposes of the consultation the employer has to give information: such as reasons for the proposals; the number and descriptions of employees it is proposed to dismiss; the method of selecting them and carrying out the dismissals; and the method of calculating dismissal payments.
The whole point is that the consultation should be meaningful and genuine, not just going through the motions. The consultation must cover discussion about avoiding the dismissals, reducing the number to go and trying to mitigate the consequence. It must be undertaken, “with a view to reaching agreement with the appropriate representatives”. Often of course agreement will not actually be reached, particularly if redundancies do result. The employer has however to show that they have tried, genuinely, in accordance with the requirements as to timing and information and with a provisionally open mind. If the matter comes to the Tribunal acting skills will not go down well.
There is little choice about it. Compliance is strongly advised as the risks otherwise are high. If a complaint is successfully brought about failure to comply with the Regulations then the Tribunal has to make a declaration of that failure and may make a protective award. This is an award of pay to those employees who have been dismissed, or whom it is proposed to dismiss and in respect of whom there has been failure to consult. A protective award maximum is 90 days actual pay in respect of each employee. It is meant to be a punishment and to hurt the employer rather than to compensate the employee. Subject to this, the Tribunal decides on the basis of what is just and equitable. At least trying to comply with the Regulations will therefore lower the financial risk. Ignoring them is asking for financial trouble.
The application of the Regulations is very detailed and the area is high risk. This is a general summary to raise awareness. Therefore, if your business is contemplating redundancy on anything like the scale mentioned above, please do take legal advice at the earliest possible stage. To do otherwise is to walk blindfold into a legal minefield.
For the legislation in question we are once again indebted to Europe. The law is mainly to be found in the Trade Union and Labour Relations Act 1992 section 188, as enhanced by various regulations. Further information on this may be found on the BERR website under Employment matters/A-Z of employment/Redundancy/Redundancy consultation and notification:guidance, most of which entries are to be found at the bottom of the web page.
Frances Barker is Employment Partner at Blocks Solicitors.
Contact her at Blocks on 01473 343905 or email@example.com