Rewriting the rule book on redundancies

Under UK law, an employer is required to consult “collectively” (that is, with the recognised trade union if there is one, or employee representatives if not) about certain matters. Most commonly, this applies when relatively large numbers of redundancies are planned.

Employers need to know what these obligations are and when they apply. The collective consultation duties are stringent, and the penalties for getting it wrong can be high.

The rules are not just concerned with the fact that you have to consult, but about how you consult, who you consult with, how representatives are elected if there are none in place already, what information has to be given in writing and how long you must consult for. The minimum period after starting consultation before redundancies can take effect now ranges from 30 to 45 days depending on the numbers involved, so planning is key to getting the process right.

In redundancy situations, current UK legislation states that the collective consultation duty is triggered when an employer is proposing 20 or more redundancies at “one establishment” within a period of 90 days or less. Generally (except in a few unusual cases) most people have taken “one establishment” to mean one site.

However, in a recent decision by the Employment Appeal Tribunal this has been ruled to be contrary to European Law. The decision basically means that the legislation has to be read as if it no longer contains the words “at one establishment.” As a result, if an employer is planning 20 or more redundancies across its workforce as a whole, the duty to collectively consult will be triggered.

The case was brought by the union which represented a large group of former employees of Woolworths and Ethel Austin. After both companies went into administration, large scale redundancies were carried out but a sizeable number of employees were not involved in the collective consultation process as they worked in stores with fewer than 20 staff.

This decision highlights how the law can be a moving feast as the process seems to have been in compliance with long established practice and the way UK law was generally understood at the time of the redundancies.

The union’s claims having been successful, the Government must now foot the bill due to the fact that both employers in this case are insolvent. The compensation bill is reportedly going to be in the region of 60-90 days gross pay each for some 4,000 employees.

Against the context of the last few years (and where many feel we still are in economic terms) this is a significant decision. From our personal experience it seems that some attempts to bring retrospective claims are already being considered (although it is unclear whether these will succeed, particularly where the redundancies took place over three months ago). Employers who have recently carried out multiple redundancies over a number of sites but who followed the accepted practice before this decision may also have a nervous wait to see if this case is successfully appealed. However, the Government has not shown a strong appetite for pursuing an appeal at present.

Those considering redundancies in the future need to look at the total number of redundancies across the whole workforce and not just at each site. The result is naturally going to be that more employers will be caught by the obligation to collectively consult and there is no hiding from the fact that redundancy procedures have the potential to be lengthier and more complex in the future – but the key is to be aware of this, to plan for it and find out early what you need to do to comply.

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