Q When does the obligation arise?
A Employers must consult when they propose to make 20 or more employees redundant at one establishment within a period of 90 days or less. There are a number of components to consider. For example, a 'proposal' arises before a decision is made (as otherwise the consultation would be worthless).
Consider which employees to count. Volunteers for redundancy must be included in the calculation.
The concept of an 'establishment' does not necessarily mean employees who are based at a particular site. It is important to remember that the term 'dismiss as redundant' has a wide meaning and covers changes to terms and conditions through dismissal and re-engagement.
Q Who must the employer consult?
A The employer must consult all 'appropriate representatives' of any 'affected employees'. 'Affected employees' are those 'affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals' - a wider meaning than those who may be considered for dismissal. It can cover those affected by any reorganisation arising out of the redundancies.
'Appropriate representatives' will be either representatives of a recognised trade union, representatives directly elected for the purpose or appropriate existing elected representatives. There is a specific method for electing representatives.
Q What does consultation involve?
A The Act contains a list of information which needs to be provided prior to consultation commencing. Consultation must include ways of avoiding the dismissals, reducing the number of employees to be dismissed and mitigating the consequences of the dismissal. Consultation needs to be undertaken with a view to reaching agreement. It must take place 'in good time', meaning the length will depend on the circumstances. There are minimum 'protected periods' of 90 days when 100 or more redundancies are proposed and, if fewer employees are involved, 30 days. Best practice would be for the protected period to have elapsed before notice is given to any employees. The employer must also notify the government using an HR1 redundancy form.
Q Is it necessary to consult over the business reasons for the redundancies?
A Until recently the answer would have been no. The case of UK Coal Mining Limited v National Union of Mineworkers, however, decided that, as part of the obligation to consult over ways in which the redundancies can be avoided, an employer is required to consult over the business reason for the redundancies. Although this does not mean that representatives can veto proposals, it is a significant decision and may make consultation more onerous for employers.
Q What happens if an employer does not comply with the duty?
A The maximum award available is 90 days' uncapped pay per employee. The cost of non-compliance can therefore be high. A recent case confirmed that in the absence of consultation the starting point should be the maximum award of 90 days' pay and this should only be reduced if an employer can establish that there were special circumstances/mitigating factors. The level of the award relates to the seriousness of the employer's default, not the employees' loss.
The potentially high cost of not complying with this duty was highlighted in a decision of the Employment Appeal Tribunal in which employees who were not represented by the trade union who successfully brought the action were allowed later to become parties to the proceedings to participate in a challenge to the decision and potentially to benefit from a judgment against the employer. This means you cannot assume if a trade union brings an action that it is only the members of the union who can benefit from a successful outcome. Others could come forward to rely on the decision to claim their money.
Q Does it matter that the employer is in, or about to enter, a form of insolvency?
A In theory, no, in that the duty still applies, although it may have a bearing on the extent of the duty and an employee's recourse. This could well become a common scenario in the current worsening climate. The application of the law in this area is complex. For example, a High Court case held that the recourse available to employees for a protective awards for failure to consult after the onset of insolvency is limited and the only remedy will be against the secretary of state. This decision is however subject to appeal.
Q Is it possible to make a payment to employees in return for a waiver of their right to be consulted?
A A complaint in relation to a failure to consult can only be settled through arbitration service Acas, not by way of a statutory compromise agreement. For this reason, it is unusual for employers to use a compromise agreement solely to settle a claim for failure to consult. It is more common for a compromise agreement to be used to settle other claims and incorporate a right of set-off, along with an acknowledgment that the settlement sum is payable in respect of this obligation in the hope an employee will then not pursue any such claim.
Q Does collective consultation obviate the need for individual consultation?
A If there is a duty to collectively consult, regardless of whether or not that duty has been complied with, the standard dismissal and disciplinary procedure will not apply. This does not, however, mean that an employer does not have to engage in individual consultation to ensure the dismissal is fair.
Matthew Whelan, solicitor, Speechly Bircham