It’s been widely reported that Guy Hands, EMI’s new chairman, held a meeting with staff to inform them that the company plans to carry out a number of cost-cutting “initiatives”, including making 2,000 redundancies in the next six months.
Some of EMI’s artists are up in arms about these plans and have threatened to quit EMI as a result. But what about EMI’s staff? Should EMI have started redundancy consultation sooner? What is the current position on consultation?
Obligations
The general position is that if an employer is ‘proposing to dismiss’ 20 or more employees in a 90-day period, it must consult with staff representatives (such as unions) about the dismissals. The consultation is meant to find ways to avoid or limit the number of dismissals or, failing that, to minimise their impact. Identifying when there are ‘proposals to dismiss’ is critical because consultation must begin ‘in good time’ once there are such proposals.
Last September, an important ruling (UK Coal Mining Limited v NUM) held that employer redundancy consultation obligations require employers to consult staff representatives about the reasons for the decision to make redundancies and the consequences. So consultation should take place before the employer takes the decision to make redundancies.
The union should have been told about the plans and the reasons for the redundancies in advance and given an opportunity to suggest alternatives. The employer was not free simply to take a decision that it knew would lead to redundancies without at least giving the union an opportunity to discuss it.
Employee veto myth
It has been suggested that the UK Coal Mining decision gives staff representatives a veto over the employer’s business decision, thereby spelling the end of managerial prerogative. This is not the case.
To comply, employers will have to tell staff representatives about the reasons for the redundancies in advance. Whether there is a genuine redundancy situation will be decided in exactly the same way as before. Once the business case for the decision is discussed, and the representatives’ views are considered, the final decision still rests with the employer.
This ruling won’t necessarily make the process longer, as the maximum length of the consultation period stays the same. The ‘trigger’ for consultation is likely to be reached sooner, before a decision to make redundancies is taken, and consultation may be more likely to last the full period because the reasons have to be discussed.
Employers should start consultation when the redundancies are “a clear, albeit provisional intention”. The duty is not triggered just because redundancies have been “mooted as a possibility”. Ensure that any initial planning documents do not imply that a firm decision has been taken.
Protective awards
Failure to comply with consultation obligations can lead to tribunals making protective awards against employers of up to 90 days’ pay per affected employee.
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It is not clear whether EMI has made a firm decision about making redundancies. But if it has, it could potentially be liable for tens of millions of pounds in protective awards as it appears to have failed to adequately consult with 2,000 affected staff. So much for cost-cutting.
Key points
- If an employer is proposing to make 20 or more redundancies in a 90-day period, it must consult employee representatives.
- Consultation is meant to find ways to avoid or limit the number of redundancies or to minimise their impact.
- Identifying when there are ‘proposals to dismiss’ is critical because consultation must begin ‘in good time’ once there are such proposals.
- Consultation should take place before an employer takes a decision to make redundancies.
- Employers are not free to take a decision that they know could lead to redundancies without at least giving employee representatives an opportunity to discuss it.
- Ensure that any initial redundancy planning documents do not imply that a firm decision has been taken.
