Legal Q&A: Collective redundancy

The economic downturn and the credit crunch means the threat of redundancies is raising its head. Some 10,000 job cuts are expected in the City alone over the next 12 months, Despite some analysts saying 2008 will see a return to ‘normality’, anecdotal evidence suggests many large employers will lay off staff this year.

So, with redundancy high on the agenda, what steps should those in HR consider when instigating a collective redundancy programme?

Q When does a collective redundancy situation arise?

A It arises where an employer is proposing to make 20 or more employees redundant at one establishment within a period of 90 days or less.

Q Who should you consult with?

A The employer must consult with representatives of the affected employees.

If the employer recognises a trade union, consultation will generally be with representatives from that union. If no union is recognised, the employer has a choice over whom to consult. If there is already an elected employee representative body with a mandate to consult on collective redundancies, the employer may consult with representatives on that body. Alternatively, the employer may consult with representatives elected by the employees for the particular redundancy exercise.

Generally, collective consultation may only be carried out directly with the employees if the employees had a reasonable opportunity to elect representatives and did not do so.

Q Do you need to speak to the employees?

A Yes. The collective consultation obligations are in addition to, not instead of, the obligation on the employer to ensure that the dismissal of an employee is fair. The employer should follow a fair procedure with each employee, including informing the individual that a redundancy exercise has commenced and that they have been provisionally selected for redundancy, explaining the reasons for that selection and giving them the opportunity to question their selection.

Q How quickly can the collective redundancy process be completed?

A Collective consultation with representatives must begin in good time before the first redundancy takes effect. Minimum time periods apply of:

• at least 30 days before the first dismissal takes effect if between 20 and 99 redundancies are proposed

• at least 90 days before the first dismissal takes effect if 100 or more redundancies are proposed.

However, if an employer has genuinely sought to consult with a view to reaching agreement with the representatives and has either reached agreement or exhausted the possibility of agreement, there is no need to continue the collective consultation for the entire 30 or 90-day period.

In such situations, the employer may move on to individual consultation with the employees and give notice of dismissal, even within the 30- or 90-day period. However, the dismissals must not take effect before the relevant 30- or 90-day period has ended.

Q What happens if a business fails to follow the collective consultation process?

A Representatives could bring claims in the employment tribunal on behalf of the employees. If a tribunal finds that the employer had not complied with the law on collective redundancy, it may make a protective award to all affected employees. “Affected employees” could mean all employees put at risk of redundancy, not just those actually selected for dismissal.

The maximum amount of such an award is 90 days’ gross pay in respect of each affected employee. An employment tribunal will start off with this maximum award and reduce it only if there are good reasons to do so. The presumption of a 90-day compensation award applies whether consultation should have lasted 30 days or 90 days. As there is likely to be a large number of affected employees, it is worth keeping in mind that a failure to inform and consult as required by law could be expensive.

Because collective redundancy law does not remove the need to carry out individual redundancy consultation, employees are also entitled to bring claims such as unfair dismissal as they would be in any other dismissal scenario.

Laura McVicker is a solicitor in the employment team at Pinsent Masons

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