Consultation with employees on redundancies can bring some workable
solutions, says Philip Whiteley
Amid the furore of BMW’s deal to sell Rover, it would be easy to assume
employers have minimal duty to inform staff of closures and redundancies.
But while the initial announcement can sometimes be made prior to
consultation, there is continuing legal ambiguity. And there are strict rules
on talks that must be held on the details.
Last month a tribunal ruled that Middlesbrough Council was in the wrong
after it issued redundancy notices to 345 employees the day after councillors
approved the redundancy plan. It came shortly after Personnel Today revealed
how the retail giant Sainsbury’s is facing dozens of claims for unfair
dismissal over allegedly illegal setting of criteria while making 100 managers
The law appears to be clear. There must be consultation over redundancies.
Where more than 20 staff are affected it must be on a collective basis.
Criteria must be fair, and the grounds for job cuts must be genuine financial
Moreover the law was toughened last autumn. All employees in the relevant
business unit must be consulted – not just those about to be made redundant.
The union must be the consulting partner where it is recognised.
Where the grey area occurs is in the stage at which consultation should
begin. Middlesbrough Council argued that as long as consultation had begun as
dismissal notices are issued this is sufficient. It is to appeal against the
Unions argue part of the trouble stems from a misunderstanding of stock
market rules, which appears to be filtering through to private companies and
the public sector.
The MSF is fighting to overturn in the European Court a tribunal ruling it
lost last year against United Assurance. The company was formed by United
Friendly and Refuge Assurance and said there would be 1,700 redundancies as it
announced the merger.
The tribunal agreed there has to be a specific proposal for redundancies
before consultation begins. But MSF said that the European Collective
Redundancies Directive refers instead to consultation where an employer is
"contemplating" mass redundancies. Last month it lodged a formal
complaint with the European Commission.
Middlesbrough Council made a similar defence to United Assurance’s, arguing
that it is acceptable to begin consultation once formal notices are issued.
Unlike United Assurance, however, Middlesbrough lost, indicating that
tribunals view things differently where the stock market is involved.
"The whole rationale behind having some sort of legislation for
information and consultation was to provide ways and means of avoiding
redundancies and numbers affected," said Harriet Eisner, international
officer at the MSF union, which was not involved in the Middlesbrough case.
"We are saying that all we want is the chance to negotiate in order to
mitigate redundancies," Eisner added.
Talk like this can receive a dismissive response from employers.
Consultation can slow things down, they argue, and make matters worse; the
market situation can deteriorate during the delay and more cost-cutting needed
as a result.
But this supposes that managers have a monopoly on wisdom. Last year
Rolls-Royce & Bentley needed savings, but through its partnership with the
unions came up with new banked hours arrangement. The agreement prevented 400
lay-offs and meant the company held on to scarce skills.
"Five years ago we would have dealt with this through
redundancies," change management director Paul Victor told the Anuman
conference earlier this year. "We looked at possible solutions and came up
with 17, the most significant of which developed into the time banking
The utility Centrica has avoided industrial action and maximised options for
redeployment by keeping lines of communication open.
The cases raise the point, do employers protest too much? Research by
Warwick University indicated that consultation can substantially alter the
terms on which people are laid off, in some cases to the mutual benefit of
employees and the company.
"The previous government’s ‘minimalist’ approach, intended to be
business-friendly, may have proved counter-productive," researchers Mark
Hall and Paul Edwards wrote in the Industrial Law Journal.
Yvonne Bennion, policy specialist at the Industrial Society, said employers
should focus more on best practice than on the law. "If an organisation
thinks that all it has to do is observe minimum compliance with the law then it
is not going to manage its relationships with its employees effectively,"
"Whenever redundancies occur, the whole basis of trust in an
organisation is called into question. Sometimes organisations think that they
do not have time to consult, but involving employees early on can sort out a lot
of the problems. Lack of consultation will hinder the progress that the
organisation is trying to make."
Employee representatives can offer solutions, as in the Rolls-Royce &
Bennion said, "I was in a situation where I had to make some people
redundant, and on the face of it looked as though there was a very strong case
for making a certain individual redundant. But when we went through all the
criteria we discovered very important aspects on individual’s performance which
had not really been known before."
Trust on the part of employees can take years to rebuild, and is
increasingly recognised as key to competitive advantage. Employers need to take
note before they swing the axe.