There are several important steps that employers need to take when entering into a collective consultation process in order to make staff redundant. This forms the second part to my recent blog on redundancies and individual consultation.
In my recent blog, I outline the key parts of a fair redundancy process, including what the three genuine reasons for redundancy are and the important elements of a fair process. These considerations will still apply in a collective redundancy process and an employer must always have consideration of these key principles of fairness which are in play.
Collective Consultation – key steps
In this blog, I aim to summarise the key steps employers must take to comply with the regulations set out in section 188 of Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”). TURLCA imposes the duty to collectively consult on employers. This can be a tricky process for employers to follow and careful planning will be imperative to achieve a fair, open and thorough process. The key steps and considerations for employers include the following:
When does the duty to collectively consult arise?
The duty to collectively consult arises where an employer is proposing to dismiss (my emphasis added) as redundant 20 or more employees at one establishment within a period of 90 days or less. “Proposing to dismiss” is the key phrase here and it can be difficult for employers to know exactly when they are proposing to dismiss. It is clear from case law that the obligation will arise before a decision is made by the employer to make redundancies. It will, however, require more than a mere contemplation of potential redundancies in the future.
As I set out in my previous blog, a key part of a fair process will be consulting with affected employees with an open mind and before decisions have been made. Consultation must therefore begin while the proposals are still at a formative stage in order to avoid employees alleging the consultation was a sham.
It is also important to be aware that any voluntary redundancies should be taken into account by the employer when assessing if the duty to collectively consult has arisen i.e. they cannot be discounted so as to avoid the obligation under TURLCA.
Taking advice at an early stage in the process will enable employers to understand when the obligation arises and to put a clear plan in place.
With whom should an employer inform and consult?
The duty on employers is to inform and consult appropriate representatives of the affected employees (those affected by the proposed dismissals or by measures proposed to be taken in connection with the dismissals). Employers must also consult individually with potentially redundant employees and cannot neglect to do so even though they are collectively consulting.
The term ‘appropriate representatives’ covers three categories of representatives:
- Representatives of a recognised trade union;
- Directly elected representatives, elected by employees affected by the redundancy proposal for the purpose of consultation on that proposal; and
- A standing body of elected or appointed representatives not specifically elected for the purpose of redundancy consultation.
If a trade union is recognised by the employer then they must consult with the trade union representatives.
If there is not a recognised trade union then the employer can decide whether to elect representatives specifically for the redundancy exercise, or whether to consult with an existing consultation body. An employer may be able to consult with an existing consultative body (number 3 above) if, having regard to the purposes for and the method by which that body was elected, they have the authority from the employees to be consulted about collective redundancies. Employers should be careful if they elect to choose option 3 (for example, they would need to be clear that the standing body has authority from the affected employees) and specific advice should be taken before consulting with an existing standing body of representatives.
With regards to the election of employee representatives (number 2 above), statutory rules apply and employers will need to follow these carefully. In summary:
- The employer must ensure that the election is fair;
- The employer must ensure there are sufficient representatives to represent the interests of all affected employees (taking into account the number of affected employees);
- The employer should determine before the election the term of office of employee representatives;
- Only affected employees can be candidates for election as an employee representative and an employer cannot unreasonably exclude an employee from election;
- All affected employees on the date of the election can vote for employee representatives and are entitled to vote for as many candidates as there are representatives;
- So far as possible, voting should be in secret;
- There is no specific time-frame for an election. Consultation cannot start until after the representatives have been elected. It is, therefore, much harder for an employer to rush through a redundancy procedure when the obligation to collectively consult exists.
The process of collective consultation
Consultation must begin in good time and there are minimum time periods which apply depending on the number of the proposed redundancies:
- Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect;
- For fewer than 100 redundancies, the minimum period is 30 days.
Consultation begins with the provision of information on the proposals to representatives. The statutory scheme envisages two key stages:
- The provision of written information to the representatives;
- Consultation on the proposed redundancies “with a view to reaching agreement” about certain matters .
While it is not necessary for employers and representatives to reach an agreement, an employer should aim to seek agreement rather than confirm that all decisions have been already made or that they will not be reviewed during consultation. Consultation should also involve consideration of how to avoid the dismissals or reducing the number of dismissals (where possible).
Notifying Business, Energy and Industrial Strategy (“BEIS”) – Form HR1
Where the duty to collectively consult exists, the employer must also notify BEIS of the proposed redundancies and failure to do so is a criminal offence. This is, therefore, a key step for employers. Notification to the Secretary of State must be in writing on a form HR1, and must include the identity of any employee representatives to be consulted and the date on which such consultation began. The notification must be copied to all of the employee representatives who are to be consulted.
When there are proposed redundancies of between 20-99 employees within a 90-day period, notification must be provided and received by the Secretary of State at least 30 days before the first dismissal takes effect. When there are proposed redundancies of 100 employees or more within a 90 day period, notification must be received by the Secretary of State at least 45 days before the first dismissal.
What’s the risk of getting it wrong?
The risks are significant. Failure to comply with any of the rules on information or consultation, or on the election of representatives, can lead to a protective award being made by an employment tribunal. The maximum protective award is up to 90 days’ gross pay for each dismissed employee. This is an expensive liability. In addition, employees could issue claims for unfair dismissal at the employment tribunal. Alongside this, employers could also face adverse press coverage which could damage their reputation.
Special circumstances defence
Where there are special circumstances which mean it is not reasonably practicable for the employer to consult in good time or provide the statutory information under TURLCA, the employer is not required to fully comply with the duty, but must still take such steps as are reasonably practicable in order to comply. This defence applies to failures to consult in good time, failures to consult on the required topics with a view to reaching agreement, or failures to provide the required statutory information on which consultation is based. The term “special circumstances” is interpreted narrowly and so caution should be taken before relying on this defence.
There is no definition of “special circumstances”, but an insolvency situation on its own will not be sufficient. It is possible that some employers will argue that the impact of COVID-19 on their business qualifies as a special circumstance. This may be the case, however, as yet this has not been tested through the courts. If an employer’s business has been declining slowly over time, it is unlikely this will constitute a special circumstance. If an employer does run with this defence, then it is important that they still do all they can to comply with the duty,
If collective consultation is carried out properly by the employer, the risk of a successful unfair dismissal claim will be reduced (albeit not altogether). Therefore, although the duty does pose additional obligations on employers, if the process is planned carefully, a positive outcome can be achieved in difficult circumstances.
We have a large employment team here at Paris Smith who would be delighted to help guide you through this process. Please feel free to get in touch with a member of the Employment team.
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