Employment law clinic No 12 Collective redundancy

THECHALLENGE:
A company is ready to make a number of its workforce redundant, but how does
the law define redundancy and what are its obligations on consultation with
employees? And what can an employer do to best mitigate against the
consequences of dismissal? Charlotte Hamer and Paul White of the Employment and
pensions group at Stephenson Harwood, weigh up the issues.

In a collective redundancy situation, employers have additional statutory duties
to those required for individual redundancies and employees have additional
statutory rights. However, in both collective and individual redundancies,
there must be warning and consultation with the employees, fair criteria for
selection and a search for alternatives to dismissal before the decision to
dismiss is taken.

Is it redundancy

There are two definitions for redundancy – in the Employment Rights Act 1996
and the Trade Union and Labour Relations (Consolidation) Act 1992.

The ERA definition is that a redundancy situation will exist if a company
ceases to carry on business at a particular location or if its requirement for
employees of a particular description has ceased or diminished. The Tulrca
definition simply states that a redundancy situation is when an employee is
dismissed for a reason unrelated to him.

As the collective redundancy provisions are set out in Tulrca, it is worth
remembering that there may be situations when there is not an ERA redundancy
but there is a Tulrca redundancy – dismissals for ‘some other substantial
reason’, for example.

Tulrca applies if an employer is intending to make redundant ’20 or more
employees at one establishment within a period of 90 days or less’.

Duty to consult

The primary duty on the employer is to consult with the ‘appropriate
representatives’ not only of those likely to be made redundant, but of any
employee ‘who may be affected by the proposed dismissals or may be affected by
measures taken in connection with those dismissals’.

If 100 or more are to be made redundant, consultation must begin, and the
Department of Trade and Industry must be notified at least 90 days before the
first of the dismissals take effect. If the number is between 20 and 99, then
consultation must start, and notification be given, at least 30 days
beforehand. If it is necessary for the employer to arrange for employee
representatives to be elected then, consultation cannot commence until the
elected body is in place.

Appropriate bodies

If a trade union is recognised then consultation must be with that union.

If there is already a body of elected employee representatives with a
mandate to be consulted on behalf of employees, this body may be used.

In the absence of either of these, then the employer must hold elections in
accordance with provisions set out in section 188A of Tulrca.

If employees fail to elect representatives, then consultation is with each
individual employee.

Consultation

Tulrca also prescribes the form of the consultation, which must include:

– Ways of avoiding dismissals

– Ways of reducing the numbers of employees to be dismissed, and

– Ways of mitigating the consequences of dismissals.

Such consultation must take place with a view to reaching agreement. So the
representatives should not be presented with a fait accompli; nor must the
consultation process be a sham exercise. Before consultation certain prescribed
information must also have been presented to the representatives in writing,
including:

– The reasons for the proposals;

– The numbers and description of employees it is proposed to make redundant

– The proposed method of selecting those who may be dismissed, and

– The proposed method of carrying out the dismissals, including the
timescale

Remedies

A failure to inform and consult properly may lead to an application to the
Employment Tribunal, which may order the employer to pay to the affected
employees compensation of a maximum 90 days’ pay (subject to a limit of £250
per week).

Key points

– Applies when an employer is dismissing as redundant 20 or more employees
in the same establishment

– Establishment does not necessarily mean building – it can include a
department spread around different buildings even in different areas

– Consultation must begin in good time; the time limits of 90 days if 100 or
more are redundant and 30 days if 20 or more are redundant are a minimum

– Even if conducting a collective redundancy exercise, the dismissals are of
individuals and must therefore be fair

– After the collective consultation process is complete – or almost complete
– individual consultation should take place with the employees who have been
selected for redundancy.

– Redundancy should not be used as a method to get rid of poorly performing
employees

– If employees consider they have been treated fairly and properly, they
will rarely take a stand. It is usually aggrieved employees who want ‘their day
in court’

By Charlotte Hamer,  the
professional support lawyer and Paul White a senior associate in the employment
and pensions group at international law firm Stephenson Harwood

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