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01 February 2016

Informing BIS of collective redundancies

Under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) Part IV, Chapter II, an employer who proposes to make between 20 and 99 redundancies at one establishment over a period of 90 days or less has a duty to inform the Secretary of State at the Department for Business, Innovation and Skills (BIS) at least 30 days before the first dismissal. Where 100 or more redundancies are proposed, the notification period is 45 days. Advance notification of redundancies is normally done by lodging form HR1 with BIS. The Redundancy Payments Service then collects the information and distributes it to those government departments and agencies that offer job brokering and/or training services to redundant employees.

Failing to notify BIS of collective redundancies is a criminal offence. The fine that could be imposed on an employer following a summary conviction was previously capped at £5,000. However, since 12 March 2015, there is no upper limit. In addition, senior officers of a company can be prosecuted personally and disqualified from acting as a director for up to 15 years where the offence is shown to have been committed with their 'consent or connivance' or is attributable to neglect on their part.

Two recent cases are the first criminal proceedings against former directors for failing to lodge form HR1. In October 2015, the Insolvency Service confirmed that David Forsey, former Chief Executive of Sports Direct, had been charged with an offence contrary to Section 194 of TULRCA after failing to notify BIS of plans to lay off warehouse staff because of the collapse of its USC fashion outlet in Scotland. Two hundred staff were given just 15 minutes' notice that they were losing their jobs.

Three directors of the courier firm City Link had been charged with the same offence after more than 2,300 employees of the Coventry-based firm were made redundant on Christmas Day in 2014 when the firm went into administration. BIS claimed that the directors had been aware that redundancies were inevitable some days before HR1 was lodged by the company administrator.

However, the directors have now been acquitted after Deputy District Judge David Goodman found that the three men had genuinely believed that a sale in administration was likely. Judge Goodman said, "A director cannot be expected to put a crystal ball on his or her desk at a time of huge shock and turmoil, and predict the likely consequences of an action, unless a consequence is either the only foreseeable one or is the only consequence that can be reasonably envisaged."

BIS has said it is considering the judgment.

Says employment partner, Jo Davis: "Whilst the City Link decision would seem to make it harder for BIS to succeed in prosecutions against senior executives under TULRCA Section 194 than the 'proposing to dismiss' test would suggest, senior officers of companies contemplating making redundancies are advised not to neglect their obligations in this regard."

For advice, contact Jo by calling 01753 279029 or email employmentlaw@bpcollins.co.uk.

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