23 June 2020
Collective consultation and redundancies
Jo Davis, employment group leader and partner at B P Collins, provides an overview on what employers need to think about when they are considering making a large (20+) number of redundancies.
Jo considers the various stages of the process, as well as considering the statutory definitions of the Trade Union and Labour Relations (Consolidation) Act 1992 ( TULRCA).
Proposing to dismiss
The obligations on an employer begin at an early stage. Employers cannot begin a consultation with a closed mind or properly consult over something that they have already decided to do. Consultation must therefore begin while proposals are still at a formative stage.
Before the duty to consult arises, the employer's decision-making process must be sufficiently well advanced to have identified the fact that, over 20 employees would be dismissed as redundant at one establishment, within a period of 90 days or less.
An employer may also "propose" redundancies even though alternatives to redundancy are also being considered.
For these purposes, ‘dismissals’ are terminations of an employment contract, and ‘by reason of redundancy’ means that the reason for the dismissal does not relate to the individual employee concerned.
This wider definition of "redundancy" means that, even if you are planning on simply asking your employees to take a pay cut, and if you have in mind that, if they don’t agree, you will need to terminate their employment and offer re-engagement on the reduced terms, this could well trigger the duty to collectively consult.
The expiry of fixed-term contracts on their agreed termination date is excluded from the definition.
The term ‘establishment’ means “the local unit or entity to which workers are assigned to carry out their duties.”
This has been the subject of considerable case law. For example, when Woolworths went into administration, many employees were made redundant. The question was whether each store was an establishment or whether this was ignored as being incompatible with EU law. The European Court of Justice said an ‘establishment’ was not incompatible but gave guidance, saying that it was the entity (or "unit") to which the workers made redundant were assigned to carry out their duties, that constituted the ‘establishment.’ So, in the Woolworths case, each branch was a separate ‘establishment’ and so the employees in stores with less than 20 employees lost out.
It’s important to also note that group companies are separate employers for these purposes. So, even if two group companies are based at the same geographical location and each proposes 19 redundancies, neither has an obligation to collectively consult.
Trade Union and or Staff Representative
Employers must consult with trade union representatives, rather than any other category of representative, where the affected employees fall within a category in respect of which an independent trade union is recognised. So it’s not a question of whether the affected employees are trade union members, but whether they fall into the bargaining unit as defined by the collective agreement.
Where there is a recognised union, but it is not recognised in respect of all affected employees, the employer must consult other appropriate representatives in respect of those employees who are outside of the bargaining unit.
If you need to collectively consult but do not recognise a trade union, you will need to hold an election.
Given the constraints of lockdown, you may need to consider more representatives than you would otherwise appoint, so that they can realistically communicate with the employees. A ‘Zoom’ call with lots of employees, might be a little unmanageable for them. However, equally, you need to balance that with your ability to consult with employee reps if you have a lot of them. You will need to find the right balance, so that fair and meaningful consultation can take place.
No affected employee should be “unreasonably excluded” from standing. If an employee is on furlough or shielding, they should still be invited to stand as an employee representative. Being on furlough doesn’t stop an employee being an employee representative, as it doesn’t constitute work under the furlough scheme. Also, as far as is reasonably practical, voting must be in secret.
Once you have your representatives in place, the provision of the information kick starts the clock on collective consultation. This must be in writing and include:
- The reasons for the proposed dismissals.
- The numbers and descriptions of employees whom it is proposed to dismiss as redundant.
- The total number of employees of such description employed at the establishment in question.
- The proposed methods of selecting employees carrying out the dismissals,including the period over which the dismissals are to take effect.
- The amount of any redundancy payments to be made, over and above the statutory redundancy payment.
- Where the employer is proposing to dismiss 100 or more employees at one establishment within a 90-day period, consultation must begin at least 45 days before the first dismissal takes effect.
- Where the employer is proposing to dismiss between 20 and 99 employees in a 90-day period, consultation must begin at least 30 days before the first dismissal takes effect.
The periods set out in TULRCA are minimum requirements. The overriding obligation under TULRCA is that consultation begins "in good time" before the redundancies take effect. In some cases, the relevant minimum period may be insufficient for there to be proper consultation on all the issues on which the employer is obliged to consult.
Since the obligation under TULRCA is to consult with a view to reaching an agreement, the process of consultation should continue for as long as is appropriate, in order to either reach an agreement or exhaust the possibility of agreement.
Provided that you have genuinely sought to consult with a view to reaching an agreement and have either reached agreement or exhausted the possibility of one, the only restriction which prohibits the employer from proceeding with the redundancy proposal, is the fact that dismissals cannot take effect within the relevant minimum period, after the start of consultation. Employers can give notice of termination during this period, as long as the expiry of the notice occurs outside the period.
In practice, many employers will ensure that consultation does last for a 30 or 45-day period or, at least, that such a period has elapsed from the beginning of consultation before the process of actually implementing the individual redundancies (such as giving notices of dismissal). This is certainly the prudent approach. The danger for employers in issuing notices of termination during the "consultation period" is that the employer will be held not to have allowed the consultation to run its full course. Once notice of termination of employment has been given, you are effectively stating that the consultation process is at an end.
Remember that this article only relates to matters arising from the obligation to collectively consult in larger scale redundancies. Employers must still go through the normal obligations regarding individual redundancy consultation.