Redundancy rules apply when work terms alter

Changes in employee contracts and conditions can trigger obligations for a redundancy consultation process, even if there are no actual job losses involved

The rules requiring employers to inform and consult their workforce about collective redundancies have undergone much upheaval in recent years. In particular, they have been extended to employers who do not recognise trade unions.

There are now detailed requirements for non-unionised organisations to consult elected employee representatives. Financial penalties for breach of the rules are also now much tougher.

From last November, the maximum “protective award” for a failure to inform or consult was increased to 90 days’ pay for each of the employees involved.

Broad definition

The duty to consult collectively applies in scenarios that would not traditionally be regarded as redundancy situations (that is, business closures and staff reductions). The definition of redundancy for consultation purposes covers “dismissal for a reason not related to the individual concerned or for a number of reasons, all of which are not so related” – section 195(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A).

This is far broader than the definition that applies in redundancy payment cases, as shown by the EAT’s recent decision in GMB v Man Truck & Bus UK (New Law Digest, 23 June 2000).

Following the merger of two independent businesses, a transport company wanted to harmonise the terms and conditions of employment of the two groups of staff. It decided to serve notice to terminate the employees’ contracts coupled with offers of re-engagement under new terms. The employees affected all continued to work, and so were deemed by the company to have accepted the altered terms.

GMB, which represented the employees, claimed a protective award on the basis that the company had failed to comply with its duties to inform and consult. Under section 188 of the TULR(C)A, where an employer is proposing to dismiss as redundant 20 or more staff at one establishment within a period of 90 days or less, the employer must consult representatives.

The employment tribunal dismissed the claim, finding that there had been no “proposal to dismiss” as the employer never intended the employees to lose their jobs. Allowing the union’s appeal, the EAT held that the imposition of the new terms necessarily involved a proposal to “dismiss”, even though the employees were immediately re-employed under fresh contracts. The tribunal had also failed to appreciate that “redundancy” covers dismissals to introduce new working arrangements.

Contractual changes

This method of implementing contractual changes avoids the risk of potentially expensive actions for breach of contract, where employers unilaterally impose changes in terms as a fait accompli. But the Man Truck decision shows that employers should pay heed to their collective redundancy information and consultation obligations.

Another reform introduced last November requires employers to inform and consult in respect of employees who may be “affected by the proposed dismissals”. Even in regular “downsizing” programmes exceeding the 20-employee threshold, employers have to assess any “knock-on” consequences for other staff.

By Richard Lister, a lawyer in the employment department at Lewis Silkin

Comments are closed.