British businesses fear continental-style consultation will impede their ability
to act quickly when the commercial need arises. But existing UK consultation
laws are already some of the toughest to work with – and treating them as an
annoying formality could be damaging, warns Christopher Mordue
As business headlines are dominated by announcements of large-scale job cuts
and union complaints of non-consultation, controversial proposals are being
developed in Europe which would give workers greater consultation rights in
advance of redundancies, restructurings and other major business decisions. UK
business leaders fear the introduction of ‘continental style’ obligations
requiring worker participation in business planning, under which decisions
taken without consultation would be void. The much publicised difficulties of
Marks & Spencer’s closure of its French stores are cited as an example of
how such rules could impede swift business responses to adverse economic
conditions.
The draft directive is a long way from being European, let alone UK, law. In
the meantime, the impact of existing rules on collective redundancy
consultation – under section 188 of Trade Union and Labour Relations
(Consolidation) Act 1992 – should not be underestimated.
The sanctions for non-compliance are among the most draconian in UK
employment law. At a maximum of 90 days’ pay per affected employee, protective
awards can run into six figures. Many employers do not fully appreciate the
extent of the obligation to consult or regard it as a frustrating and
inconvenient formality.
Benefits of early consultation
Consultation must begin within minimum time periods before the first
dismissal takes effect. The express purpose of this rule is to delay
redundancies, and allow consultation to take place. Further delays arise
because consultation can only begin when statutory information is provided to
representatives of affected employees. Where there are no trade union
representatives, the employer must first arrange for employee representatives
to be elected, postponing the start of the 30- or 90-day period.
In any event, the end of the 30- or 90-day period is not necessarily the
earliest date at which redundancies can occur. Preliminary steps before
dismissal will typically include
– Consultation over whether redundancies should occur
– Consultation over selection criteria and alternative employment
– Application of the selection criteria
– Individual consultation over redundancy selection and alternative
employment, followed by the giving of notice
Employers need to take account of each step and recognise the process can
take considerable time if financial penalties are not to be incurred.
Naturally, these problems are eased if consultation begins at an early
stage. Nevertheless, many employers delay consultation until late in their
decision-making process. This postpones the point at which the employer can
legitimately make the first dismissal, and makes it harder to demonstrate
genuine consultation with an open mind. A natural tendency to consult only
after alternatives to redundancy (such as part-time working or temporary
layoffs) have been considered and rejected by management results in an
inflexible position that makes consultation appear a mere formality.
It is not essential to provide all of the statutory information to employee
representatives at the outset of consultation. Some items may require detailed
preparatory work, in particular selection criteria and any enhanced redundancy
terms. The first issue for consultation is always whether redundancies are
necessary at all, or in the numbers proposed. So employers could begin
consultation on these issues and provide the remaining information at a later
date.
Successful consultation is a resource and a time-intensive operation. It
requires the backing of managers and HR, including detailed communications to
announce the redundancies: to affected staff, other employees, customers and
the DTI. They also need to organise the election of representatives and collate
information.
Take care that the proposals are not announced as a ‘done deal’. As the
consultation process unfolds, employees should be advised of the progress and
outcomes of consultation. It is particularly important to communicate directly
and regularly with affected employees, rather than leaving it to elected or
trade union representatives.
With large-scale redundancies or site closures, employers may need to
arrange retraining to enable employees to be redeployed internally or assist
with finding alternative employment – or organise job fairs to put employees in
touch with prospective employers.
Employee representation
In the absence of a recognised trade union for affected employees, the
employer must arrange for the election of employee representatives. There are
specific statutory rules for these elections. Organisations must ensure that
affected employees are adequately represented. The key issue is whether the
affected employees should elect representatives as one group, or whether a
number of smaller ‘constituencies’ should elect their own representatives. This
latter approach may be more appropriate if a range of employees are affected in
different ways, or to ensure these groups are properly represented.
If affected employees elect representatives as a single group, the outcome
may leave some effectively unrepresented. There are opportunities here to
maximise the efficiency of the process by streamlining, ensuring that
consultation is directly targeted for each group. There is no prescribed ratio
of representatives to affected employees. The numbers should be dictated by the
consultation structure you wish to achieve.
The greater the number of representatives, the greater the flexibility to
set up specific sub-committees to work on a number of issues simultaneously. It
is also advisable that at least two or three representatives from each group
should be elected, to avoid the need for further elections if a representative
leaves (such as through voluntary redundancy).
Voluntary redundancies
One method of implementing redundancies within the consultation period is to
invite volunteers. This is usually desirable in any event to reduce the need
for compulsory redundancies. Employers will typically offer more generous terms
to volunteers and impose a time limit for applications. In theory, even a
voluntary dismissal inside the period for consultation will be a breach of
section 188, but the risk of a significant protective award is small,
particularly if representatives agree to an early leaving date.
Consider carefully the details of any voluntary redundancy scheme. Will it
be open only to affected employees to reduce the need for selection? Will it be
offered to unaffected employees to create redeployment opportunities? If so,
will acceptance be conditional on an affected employee taking up the role? If
not, the additional dismissals may cause the employer to exceed the number of
proposed redundancies, affecting the length of the consultation period.
When can the employer dismiss?
Dismissals must not ‘take effect’ during the consultation period. This
refers to the actual termination of the employment contract. Consequently, you
can give notice of dismissal during the 30- or 90-day period.
But be cautious about the timing of redundancy notices: consultation – at
least over whether and how redundancies should occur – cannot take place after
notice is given.
Notice should only be given during this period where it has been agreed with
representatives or where consultation has been exhausted without agreement
being reached. Individual consultation will also be required, particularly over
selection for redundancy and alternative employment, before notice can be
given.
Can the obligation be avoided?
The key to the application of section 188 is the number of redundancies
proposed by a particular employer at a particular establishment within any
90-day period. If redundancies are kept below 20 in any 90-day period, the
obligation to consult does not arise.
Where the numbers to be dismissed at the establishment are kept below 100, a
consultation period of 30, rather than 90, days applies.
If there is commercial flexibility as to where redundancies are required, it
is possible to manipulate the scale of proposed redundancies to your advantage
– spreading redundancies over time, between different employers or different
establishments – to avoid or limit the requirement to consult.
But outright avoidance of the consultation obligation, where it applies, is
difficult and dangerous. The defence of ‘special circumstances’ is very hard to
establish. Not only must these circumstances render consultation not reasonably
practicable, they must be ‘special’, that is, out of the ordinary. Even where
special circumstances do exist, the employer is not excused entirely from its
obligations, but must take such steps as are reasonably practicable towards
compliance.
Staggering redundancy proposals can minimise the extent of consultation.
When calculating the numbers of proposed dismissals, redundancies in respect of
which consultation has already begun are discounted. An employer already
consulting over 20 redundancies could propose another 99 within the same 90-day
period without triggering a 90-day consultation period. Deliberately staggering
redundancy announcements in this way, however, is highly dangerous. If the
employer is found to have envisaged 119 redundancies all along, it will be
vulnerable to a protective award.
While large-scale redundancies will always face opposition, genuine
consultation will at least soften the blow by explaining the decision.
Employers should always consider the morale of their remaining workforce –
pushing through redundancies without consultation may send a very negative
message and lead employees to vote with their feet.
Christopher Mordue is an associate at Pinsent Curtis Biddle
What is consultation?
– Consultation must always cover ways
and means of avoiding redundancies, reducing their number, and mitigating their
consequences
– Employers cannot argue that consultation would have made no
difference
– Consultation must be undertaken with a view to reaching
agreement, although actual agreement is not required
– Consultation must be undertaken with an open mind, before an
irrevocable decision is taken and while proposals are still at a formative stage
– Sufficient information must be provided to allow those being
consulted to properly understand the proposals and their reasons
– Redundancy means any dismissal which is not for a reason
relating to an individual employee
– Dismissal includes the termination of any contract of
employment and the expiry of fixed-term contracts without renewal
What information must be disclosed?
Consultation begins by providing the
following information to representatives
– A statement of the proposed dismissals and the reasons for
them
– The numbers and descriptions of employees for proposed
redundancy and the total number of employees of those descriptions employed at
that establishment
– The proposed method of selecting employees for dismissal and
the proposed method of carrying out the dismissals, with due regard to any
agreed procedure, including the period over which they are to take effect
– How non-statutory redundancy payments will be calculated
– The DTI must also be informed of the proposed redundancies,
using form HR1. Failure to notify is a criminal offence
How the obligation to consult is
triggered
– Consultation is required where an
employer proposes to dismiss 20 or more employees as redundant at one
establishment within 90 days or less
– In the case of 100 redundancies or more, consultation must
begin at least 90 days before the first dismissal
– Otherwise consultation must begin at least 30 days before the
first dismissal
– Each group company is a separate employer
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– Each geographical location is usually, though not always, a
separate ‘establishment’
This article originally appeared in the December/January 2002 issue of
Personnel Today’s sister title Employers’ Law. Â To subscribe call 01444 445566 or visit www.reedbusiness.com/subscribe/employers_law.asp
