Collective redundancies and protective awards
The current recession has already caused large numbers of redundancies, and in the Comprehensive Spending Review it was announced last week that there will be hundreds of thousands more across the public sector. In this article we look at the provisions regarding collective consultation, and what happens if employees claim that the rules have been breached.
- What are the rules on collective consultation for redundancies?
Where 20 or more employees are at risk of redundancy at one ‘establishment’ within a 90 day period, the employer is required to carry out collective consultation with employee representatives before any dismissals take effect. It is worth noting that it is not the number of actual job losses that is relevant here – it is the number of employees who will be at risk. So if an employer is putting 30 people at risk, but 20 of them will be given jobs, the collective consultation provisions are still required. In addition, voluntary redundancies do count towards this total. The other point is that the relevant employees must be at one ‘establishment’. In many cases this is straightforward – the redundancies are at one clearly defined site. But there are situations where two or more sites can be found to be one ‘establishment’ for this purpose, so it is worth taking advice.
- How long does the consultation period have to be?
Where 20 or more employees are at risk, the minimum period before the first dismissal can take effect is 30 days. Where 100 or more are at risk, the period is 90 days. The consultation should take place “in good time”, and before a definite decision to dismiss has been made. Where a union is recognised, the employer should consult with union representatives – otherwise, it should involve elected employee representatives. The nomination and election process does of course add to the length of time taken by the process, as consultation cannot start until the representatives are in place.
The employer is also required to notify the Department for Business, Innovation and Skills (BIS) of the proposed redundancies, using form HR1. Failure to do this can result in a fine of up to £5,000, although fines are rarely imposed in practice.
- What happens during consultation?
The statutory process involves providing information to the representatives about the proposals and consulting “with a view to reaching agreement” – it is not a negotiation, but an employer should consider the representatives’ proposals and respond to them. The aim is to try to reduce the number of dismissals or mitigate the effects. From an employer’s point of view it can be useful to ensure that the consultation process has been explained to the representatives so that they understand their role. We have helped a number of employers to provide training for employee representatives and in particular this is useful to manage the representatives’ expectations of the consultation process. If this is of interest to your organisation, please contact us.
- What if the employer doesn’t consult?
The collective redundancy consultation requirements are in addition to each individual employee’s rights to be consulted regarding their potential dismissal – a lack of a fair procedure on an individual level can of course lead to unfair dismissal claims (where the individual has at least 51 weeks’ service). Case law shows that an employer can give employees’ notice during the 30 or 90 day periods, but only when consultation has concluded – in practice, this will be rare.
An employee can bring a claim that the collective consultation requirements have not been complied with – if they succeed, they will receive what is known as a “protective award.” Unlike unfair dismissal claims, there is no minimum period of service required to claim a protective award. Interestingly the employee does not have to have been dismissed in order to claim – it may be (for example) that they have successfully been redeployed within the organisation.
The law on protective awards for collective consultation on redundancy is very similar to that for collective consultation on a transfer under TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006).
- How much is a protective award?
The protective award is an amount that the Employment Tribunal consider is “just and equitable in all the circumstances having regard to the seriousness of the employer’s default.” The maximum is 90 days’ pay (the maximum is the same regardless of whether the consultation period would have been 30 or 90 days). The protective award is based on a week’s actual gross pay, unlike the statutory redundancy payment, where there is a cap on a week’s pay.
The idea of the protective award is to punish the employer for its failure to comply, rather than simply to compensate the employee, and this is demonstrated by the recent case law. The leading case on the protective award is that of Susie Radin Ltd v GMB (2004) in which the Court of Appeal confirmed that the starting point should be 90 days’ pay and the award should only be reduced where the employer can show mitigating circumstances.
A very recent case, Todd v Care Concern (2010) appears to indicate that the starting point should only be 90 days if there has been a complete failure to consult, rather than a technical breach. The case was regarding a protective award under TUPE rather than collective redundancies, although as mentioned above, the protective award principles are the same. However, this case was at the Employment Appeal Tribunal and therefore does not carry the same authority as Susie Radin, as that case was decided by the Court of Appeal.
Claims for a protective award can therefore be extremely expensive for employers, not least because every affected employee can bring the claim – the employer could therefore face at least 20 claims for 90 days’ pay. There is no cost to filing a claim, and because the protective award is not loss-based, employees have very little risk.
We have already seen a rise in employees raising claims for a protective award, and that trend looks set to continue. We have experience of helping employers through the collective consultation process, as well as arguing down any potential compensatory awards. If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected])