What is the definition of redundancy?
The statutory definition of redundancy is when the employer:
- Ceases to carry on the business in which the employee was employed;
- No longer requires its employees to carry out a particular kind of work;
- Closes part of its business in a specific location (e.g. factory, branch or office); and
- No longer requires its employees to carry out work of a particular kind from a specific location.
A redundancy situation may also include a situation where the employer proposes to dismiss and re-engage employees who do not agree to a proposed variation of their contractual terms and conditions.
We are thinking of making some large-scale redundancies. Will consultation obligations apply?
When an employer is proposing to dismiss 20 or more employees within 90 days or less, it has a duty to collectively consult with employees who may be affected by the proposed redundancies at least 30 days before the first dismissal takes place.
If the number of affected employees exceeds 100, the consultation must commence at least 45 days before the first dismissal.
Does the employer have a duty to consult with its employees when there are less than 20 employees?
Yes. Where there is no duty to consult collectively, an employer should have adequate one to one consultation with those individuals affected.
Does collective consultation always apply when more than 20 redundancies are envisaged?
No. The rules around collective consultation only apply when all the employees are being made redundant from “one establishment”, for example the same office, factory or building sites operating out of the same base. If you are unsure whether your employees are part of the same establishment, you should consider the following:
- What the employees actually do;
- Who the employees report to;
- Who the employees are employed by (e.g. a subsidiary or parent company);
- What is containing within the employees’ contract of employment.
Can we ever avoid collective consultation entirely?
Some employers may decide to make less than 20 employees redundant and then repeat the exercise, however, this is a risky approach. An Employment Tribunal would not look favourably at an employer who had tried to avoid its duty to collectively consult by dividing the redundancy process into different batches.
What if the individuals subject to redundancies are volunteers and not employees?
The same duty to consult applies.
When should we start consulting with employees?
The law states that if the employer is aware that employees may be affected by redundancies, it must start consulting “promptly”.
Who should we consult with?
You must consult with the “appropriate representatives” of the affected employees.
If your employees are part of a recognised Trade Union, then you should consult directly with its representatives. Once these individuals are identified, consultation can commence immediately.
If there is no applicable Trade Union, you may have another employee forum that you could consult with. If neither of these applies, you should seek advice on how to arrange for elected employee representatives. If no employee nominates themselves for election, the employer will have to consult with the affected employees individually.
What do we need to discuss?
The employer must discuss the following as part of meaningful consultation:
- Reasons for the proposed redundancies;
- Who is affected by the proposals;
- How will the affected employees be selected for redundancies;
- Outlining any agreed methods of carrying out the dismissals and the period over which dismissals are to take place;
- How the redundancy payments are to be calculated.
It is important that the employer keeps an open mind during consultation and that the situation is not pre-determined or pre-judged. If the consultation is not meaningful or adequate, this could give raise to a potential complaint to the Employment Tribunal.
Is there a way to reduce the cost of collective consultation?
An employer doesn’t have to wait until the end of the consultation period to dismiss. Provided the employer starts the consultation in good time, then the remainder of the consultation can take place within the employees’ notice period.
If the employer later determines that redundancy measures are not required, it can always retract the notice.
What are the risks associated with the duty to collective consult?
If the employer starts consultation late, it doesn’t consult appropriately or it doesn’t consult at all, the affected employees may have an entitlement to compensation. This is a rare example of punitive punishment in employment law as compensation awarded could be as much as 90 days’ pay per employee.
If the employee has more than 2 years’ service, the dismissal could also be unfair. However if the employee has grounds for discrimination there is no requirement for the employee to have obtained two years’ service to bring a claim.
What happens if we need to make more employees redundant than we had initially planned?
This might occur in an insolvency situation where the employer genuinely believed at the time consultation commenced that only a proportion of the workforce were going to be affected, only to later determine that the entire business would cease trading.
Whilst this does not exempt the employer from awarding compensation for the failure to inform and consult those employees who were not initially part of the proposals, it may be a factor to consider when assessing the size of the applicable award.
How Can Nelsons Help?
For more employer legal advice or to comment on this article, please contact one of our employment law specialists on 0800 024 1976 or contact us via our online form.