Collective Redundancy Consultation in Great Britain - changes to the legislation and Acas Guidance

more+
less-

Important changes to the rules requiring employers to conduct collective redundancy consultation with representatives of the affected employees, where 20 or more redundancies are proposed in a 90 day period, came into effect on 6 April 2013. Amongst other things, employers who are proposing to make 100 or more employees redundant at one establishment within a period of 90 days or less are now only obliged to consult with representatives of the affected employees for a minimum period of 45 days before the first dismissals take effect. Previously the obligation in such circumstances was to consult for a minimum period of 90 days. Acas has also published a guidance booklet called “How to manage collective redundancies”, which aims to give advice to employers on all aspects of handling collective redundancies. This Dechert OnPoint outlines the changes that have been made to the rules on collective redundancy consultation and summarises the key issues covered by the Acas guidance.

Collective Consultation Obligations

The Trade Union and Labour Relations (Consolidation) Act 1992 imposes various collective consultation obligations on employers proposing to make redundancies of the requisite scale. In particular, where an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer is required to consult about the dismissals with “appropriate representatives” of the “affected employees”.

“Affected employees” are those who may be affected by the proposed dismissals or who may be affected by measures taken in connection with those dismissals. “Appropriate representatives” are:

  • representatives of an independent trade union which is recognised by the employer – if there is a recognised union, that is the body which must be dealt with; or
  • if there are no such representatives, then either:
    • employee representatives elected by the affected employees for these specific purposes (using prescribed statutory rules); or
    • employee representatives appointed or elected by the affected employees for another purpose but who have authority to receive information and consult about the proposed dismissals on their behalf.

Employers must provide the representatives with specific information including, but not limited to, the reasons for the proposed dismissals, the numbers and descriptions of employees whom it proposes to dismiss as redundant, the proposed method of selecting the employees who may be dismissed, the proposed method of carrying out the dismissals and the proposed method of calculating the amount of any redundancy payments (other than statutory redundancy payments) to employees who may be dismissed.

The employer must consult the representatives about ways of avoiding the dismissals, reducing the number of dismissals and mitigating the consequences of the dismissals and must consult with a view to reaching agreement with the appropriate representatives.

Prior to 6 April 2013, if an employer was proposing to dismiss as redundant between 20 and 99 employees at one establishment within a period of 90 days, it was required to begin consulting in good time and in any event at least 30 days before the first of the dismissals was to take effect. If an employer was proposing to dismiss 100 employees or more, it was required to begin consulting in good time and in any event at least 90 days before the first of the dismissals was to take effect.

Furthermore, prior to 6 April 2013, provided that the employees had not been continuously employed for a period of more than three months, employees who were employed under a fixed term contract of three months or less or under a contract made in contemplation of the performance of a specific task which was not expected to last for more than three months were excluded for the purposes of determining whether the duty collectively to consult had arisen.

The potentially very significant penalty for failure to comply with these obligations makes it important for employers to comply with the collective redundancy consultation obligations. Failure to do so may result in an employment tribunal making a “protective award” against the employer of up to 90 days’ gross pay in respect of each dismissed employee. Furthermore, any such award will not be subject to the statutory cap on a week’s pay. Claims for breach of these collective consultation obligations can, therefore, be extremely significant in value.

Changes to the Collective Consultation Obligations

The Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment) Order 2013, which came into force on 6 April 2013, introduced the following three key changes to the rules on collective consultation, which apply to proposals to make redundancies made on or after 6 April 2013.

Timetable

Where an employer is proposing to dismiss 100 or more employees at one establishment within a period of 90 days or less, the employer must begin consulting with the appropriate representatives in good time and, in any event, must now begin consulting at least 45 days (reduced from 90 days) before the first dismissal takes effect. However, employers should note that the maximum potential protective award of up to 90 days’ gross pay in respect of each dismissed employee has not been reduced. Even though the minimum consultation period has reduced, the potential penalty for non-compliance has not.

The requirement to begin consultation at least 30 days before the first dismissal takes effect, where an employer is proposing to dismiss between 20 and 99 employees at one establishment within a period of 90 days, remains unchanged.

HR1

Where an employer is proposing to dismiss 100 or more employees at one establishment within a period of 90 days or less, the employer must notify the Secretary of State of its redundancy proposal, using an HR1 form, at least 45 days (reduced from 90 days) before the first dismissal takes effect (and before giving notice to terminate an employee’s employment in respect of any of the dismissals).

The requirement to notify the Secretary of State at least 30 days before the first dismissal, where an employer is proposing to make between 20 and 99 redundancies in a 90 day period, remains unchanged. A failure to comply the requirement to notify the Secretary of State still constitutes a criminal offence.

Fixed term employees and the collective redundancy thresholds

The exclusion of certain fixed term employees from the scope of the collective redundancy consultation obligations has been amended to provide greater clarity to employers about which employees should be included when assessing whether the collective consultations obligations are engaged.

Where an employer makes a proposal on or after 6 April 2013 to dismiss 20 or more employees, the collective redundancy consultation obligations will not apply to those individuals who are employed under a “fixed term contract” (as defined below) unless:

  • the employer is proposing to dismiss the employee as redundant; and
  • the dismissal will take effect before the expiry of the specific term, the completion of the particular task, or the occurrence (or non-occurrence) of the specific event that the employee was employed for.

A “fixed term contract” is defined as a contract of employment that will terminate:

  • on the expiry of a specific term;
  • on the completion of a particular task; or
  • on the occurrence (or non-occurrence) of any other specific event (other than the attainment of a normal and bona fide retiring age in the establishment for an employee holding such a position).

In other words, where an employee’s fixed term contract (of any length) is to terminate on the date agreed under the contract, the employer does not need to include that employee in the calculation of the number of proposed redundancies even if the dismissal will occur within the same period as the proposed redundancies.

Taking the example from the Acas guidance, if an employer proposes to dismiss 15 employees at one establishment over a period of 40 days and also proposes not to renew the contracts of a further 15 employees whose contracts are about to end within the same 40 day period (i.e. employees on fixed term contracts), there will be no obligation collectively to consult with any of the employees. This is because the employer is not proposing to dismiss the 15 fixed term employees before the expiry of their fixed terms, so these employees are not included in the calculation of the number of proposed redundancies. Accordingly, the threshold of 20 employees will not be reached.

If, however, the employer proposes to dismiss the 15 fixed term employees within the 40 day period and earlier than the date upon which their contracts are otherwise due to expire, and the reason for the dismissals is redundancy, these employees must be included in the calculation of the number of proposed redundancies. Accordingly, the employer will be proposing to make 30 redundancies within the 40 day period and will be obliged collectively to consult with representatives of the affected employees whom it is proposing to make redundant.

Acas Guidance - Overview

In conjunction with the changes made to the statutory rules on collective redundancy consultation, Acas has published a guidance booklet aimed at employers entitled “How to manage collective redundancies” (the “Acas Guidance”). Whilst the Acas Guidance reflects the changes to the collective redundancy consultation rules outlined above, it serves a wider purpose than simply outlining those changes. The Acas Guidance is intended to make it easier for employers to understand the law on collective redundancies. As such, the Acas Guidance contains, amongst other things:

  • A flowchart for employers outlining the basic principles behind collective and individual redundancy consultation.
  • Case studies which provide examples and guidance on:
    • the point at which employers might reasonably consider that a proposal to make redundancies (and about which consultation must take place) has been formed;
    • how employers can prepare for collective consultation;
    • with whom employers can consult and how; and
    • the relationship between collective and individual consultation.
  • A ten-point checklist for handling collective redundancies which includes guidance on what constitutes an “establishment” for collective consultation purposes (see further detail below).
  • Some limited guidance on collectively consulting in special circumstances, such as where the Transfer of Undertakings (Protection of Employment) Regulations 2006 (commonly known as “TUPE”) also apply, or when employers are collectively consulting in insolvency situations.
  • Guidance on best practice for looking after employees and the business itself during a collective redundancy consultation.
  • A summary of the rules on the election of employee representatives, the rights of such representatives and guidance on their role.
  • Summaries of various legal rights which must be borne in mind by employers in redundancy situations such as, for example, the rights of employee representatives to time off to carry out their representative duties.
Acas Sample Selection Criteria

The Acas Guidance also includes a sample redundancy selection matrix and a sample redundancy procedure. Acas notes that use of selection matrices for selecting employees for redundancy from a pool is increasingly popular as, amongst other things, such matrices contain agreed factors that can be applied to individuals, they are seen as fair by employees, and they can be used by employers to defend their decisions. The criteria included in the sample matrix are work performance, skill/competence, disciplinary record and attendance record. The latter two criteria are less heavily weighted than the others.

Whilst the sample criteria provide a helpful starting point for employers, particularly for those with less sophisticated or no redundancy procedures, employers must always be careful, in order to achieve their commercial objectives and ensure a fair process, to choose appropriate selection criteria which accurately reflect their requirements for the relevant role(s) and to apply their own weightings to those criteria. Furthermore, as the Acas Guidance notes, it may be the case that an employer needs to apply different selection criteria to different groups of its employees to reflect the requirements of the different roles that are to be kept or created.

Meaning of “Establishment”

The obligation collectively to consult arises where an employer proposes to make 20 or more redundancies at one establishment within a 90 day period. The meaning of “establishment” in this context is, therefore, of critical importance for employers trying to establish whether a duty collectively to consult arises especially where a redundancy exercise affects multiple sites or locations operated by the employer.

In its consultation on the changes to the rules on collective redundancy consultation, the Government stated that it is not possible, either legally or technically, precisely to define what is meant by an “establishment” as this is a fact-sensitive issue. The Government decided, therefore, to include guidance on this issue in the Acas Guidance in order to seek to assist employers in relation to this issue.

The Acas Guidance notes that the European Court of Justice has indicated that “establishment” means “depending on the circumstances, the unit to which the workers made redundant are assigned to carry out their duties”. The Acas Guidance goes on to say that in order to establish whether a workplace can be classed as an establishment, it might be helpful to ask:

  • Is it a distinct entity?
  • Does it have a degree of permanence and stability?
  • Does it have the ability to carry out the tasks it has been assigned?
  • Does it have a workforce, technical means and organisational structure that allow it to carry out its function?

The Acas Guidance states that, depending on the answers to these questions, an “establishment” can be constituted by more than one place or a place at which the employees do not habitually work.

The Acas Guidance also notes that the situation for employees who work at different geographical sites is not always clear cut and suggests that employers:

  • check what individual contracts of employment say, in terms of any geographical location the employee is assigned to and any relevant management structure; and
  • are clear about what actually happens in practice – for example, there may be patterns to where employees work and for what periods of time.

Finally, the Acas Guidance states that in working out what an establishment is, a “distinct entity” does not have to:

  • be geographically separate from other units and facilities of the undertaking;
  • be independent in terms of any legal, economic, financial, administrative or technological autonomy; or
  • have a management which can independently effect collective redundancies.

The Acas Guidance can be found here.

Topics:  Collective Redundancy Consultations, Compliance, EU, Fixed-Term Labor Contracts, Hiring & Firing, Penalties

Published In: Civil Remedies Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »