EMPLOYMENT NEWS: Collective Redundancies – Practical Problems

Although the economic climate appears more positive, many businesses are still facing threats of further redundancies in 2010.

In this newsletter we have put together questions and answers on some of the practical problems relating to collective redundancies.

When is the duty to consult triggered?

The employer’s duty to consult is triggered when it “proposes” making redundant 20 or more employees. However, the meaning of “proposes” is a huge topic of debate, particularly as UK legislation and case law conflict with the position in Europe.

This means that it can be easy for businesses to unwittingly commence consultation either too early or too late in the decision-making process.

Thus in any collective consultation redundancy programme the employer needs to consider when the consultation is triggered and how this impacts on the subsequent timetable of events.

In reality, each case will depend on its particular circumstances and also on what the business wants to achieve.

How long should consultation take?

Where between 20 and 99 redundancies are proposed within a 90 day period, consultation should last for at least 30 days. Where 100 or more redundancies are proposed at one establishment within a 90 day period, consultation should last for at least 90 days.

Difficulties with “a 90 day period” can arise particularly where redundancies are undertaken in phases. For example, if an employer makes 15 redundancies in January, another 15 in February and a further 75 in March, the duty to consult for 90 days will have inadvertently been triggered.

Therefore remember to count the total number of redundancies proposed across all phases when deciding how long the consultation process should be. Failure to do so could lead to claims for a protective award (up to 90 days’ pay) for each affected employee.

Counting to 20 and 100

The duty to consult applies where the employer proposes to make redundant 20/100 or more employees at one “establishment”. Unfortunately there is no legal definition of “establishment” and very little guidance.

Where there are several sites, it may be possible to argue that making 1 employee redundant from 20 different sites does not trigger the duty to consult. However, the duty may be triggered if there is a link between the individuals, e.g. they all work in the company’s HR team. The legal position is therefore far from clear and each case will depend on its particular circumstances.

Also, don’t forget that voluntary redundancies and fixed term contracts which are due to expire must also be included when counting to 20 or 100.

Consult with whom?

If the affected employees are represented by a recognised trade union, then consultation must be with officials of that union.

If there is no trade union, employers must consult with elected employee representatives. The election process is time-consuming and must be concluded before the 30/90 day consultation process commences. The process can also present practical problems – what happens if no-one wants to stand for election? How many representatives are needed to cover all affected employees? Such eventualities need to be catered for in the planning stages.

Selection criteria

Over the last year there has been a marked increase in the number of Tribunal claims arising from the application of selection criteria. More and more claimants are arguing that selection criteria are unfair because they are subjective, biased and/or discriminatory.

When devising selection criteria, ensure that they are independent and objective and tailored as far as possible to the particular roles. Where possible, any scores given should rely on tangible data such as appraisals or other KPI’s.

Phased terminations

In some circumstances, particularly when a large number of redundancies are necessary, implementing a phased redundancy programme can be a useful way of ensuring adequate labour resources are maintained through difficult periods. However, they can also raise practical problems.

For example, how should the business decide who should be selected to be retained for each phase? How can discrimination issues be avoided when selecting some employees over others? Should a financial incentive be offered to encourage employees to stay on / leave early? What happens if employees leave before the end of their phase – should redundancy pay be forfeited? A number of unfair dismissal and discrimination claims have arisen simply because one employee has been retained over another.

Protective award

If an employer fails to consult, the tribunal can make a protective award of up to 90 days’ full pay (uncapped) per employee. However, the award can be reduced if the employer can show that some effort was made to inform and consult.

A claim for a protective award can usually only be made by the trade union or employee representative, unless employee representatives have not been elected, in which case the employees themselves can claim. BUT: one claim is all it takes – the protective award can be awarded on behalf of all employees, even if only one representative / employee brought the original claim. A number of employers fail to recognise this and have then faced significant liability before the Employment Tribunal.

Conclusion

It is vital to plan a collective redundancy exercise carefully and well in advance. When discussing strategy and timelines with senior management, remember that the process will almost certainly take longer than the 30/90 day statutory minimum.

Also remember that it is easy to expose the business to risk in collective consultation situations and that the financial implications of doing so can be more severe than the commercial reasons for taking the action.

If you have any specific queries relating to the content of this article or would like additional information on the issues covered please contact Ranjit Dhindsa.