Making staff redundant just became much tougher after a landmark ruling moved the UK closer to continental-style employment laws.
A decision by the Employment Appeal Tribunal (EAT) last week significantly changed employers’ obligations when consulting with staff representatives over collective redundancies.
Legal experts warned that employers will now be forced to involve unions and staff in the decision-making process when they plan to close businesses and make multiple redundancies.
Unlike in Europe, UK employers have not previously needed to consult with unions about the reason for closing a workplace. Employers have instead concentrated on discussing ways to reduce the impact of a closure.
The judgment also means unions could demand access to critical business information to challenge the rationale for closures. Firms could be liable for millions of pounds in compensation if they fail to follow proper procedures.
David Bradley, head of employment at law firm DLA Piper, said financial services firms struggling to maintain staff levels on the back of the credit crunch would be hit particularly hard by the ruling.
“City employers with redundancies on their HR agenda are going to have to think carefully about how they ensure any sensitive information they now have to disclose remains within the confines of their organisation,” he warned.
Lucy Atherton, senior legal adviser at manufacturers’ body the EEF, said employers needed to ensure prompt talks with unions over redundancies as the process could take longer than before.
However Ed Sweeney, the new chairman of conciliation service Acas, said employers should not be fearful about consulting on the reasons behind closures. “Any employer worth their salt should be able to say ‘I’m doing this, and this is the justification’,” he told Personnel Today.
The landmark EAT case involved mining company UK Coal and the National Union of Mineworkers. It concerned the 2005 closure of the Ellington Colliery in Northumberland, with the loss of 330 jobs.
The union took the company to court because it failed to carry out the required 90-day consultation period before closing the pit on safety grounds.
The court ruled that the failure to consult on the reason behind the decision was unlawful. UK Coal will have to pay out more than £2m in damages to the Ellington workers.