Redundancy - Getting it Right

by Kate Russell

Collective redundancies

A collective redundancy situation arises where 20 or more employees are to be made redundant at one establishment within a period of 90 days. Consultation must be completed before any notices of dismissal are issued to employees.

The law defines the collective situation as ‘dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related’.

If you are proposing to make a large number of redundancies, you must consult in advance with representatives of the affected employees, and notify the projected redundancies to the Redundancy Payments Service (RPS). The deadline depends on the number of proposed redundancies. Notify RPS by filling in form HR1. You can be fined if you fail to do so.

Meaning of ‘establishment’

The European Court of Justice has said that ‘stablishment’ means ‘depending on the circumstances, the unit to which the workers made redundant are assigned to carry out their duties.’

In working out what is an establishment, a ‘distinct entity’ does not have to:

  • be geographically separate from other units and facilities of the undertaking
  • be independent – in terms of any legal, economic, financial, administrative or technological autonomy
  • have a management which can independently effect collective redundancies.

Numbers by establishment

Are numbers to be assessed on a site-by-site basis or as a total across a number of different sites?

This question was considered by the European Court of Justice in the case of Usdaw and another v Ethel Austin Ltd (in administration) and others (the Woolworths redundancy case.

The Court concluded that the requirement for collective consultation is triggered when the employer proposes 20 or more redundancies within 90 days at one establishment, not across the entire undertaking.

Following the decision employers are able to taken the total number of redundancies on a site by site basis. Where a site has fewer than 20 employees at risk in a 90 day period, the requirement to consult collectively will not be triggered.

Importance of consultation

The obligation to consult applies to both compulsory and voluntary redundancies, even when you intend to offer alternative employment on different terms and conditions to some or all of the employees, with the result that the number actually dismissed will be less than 20.

A complaint of failure to consult may be made to an employment tribunal, and must normally be brought within three months of the last of the dismissals. Where a complaint is upheld, the tribunal may make a protective award to employees of up to 90 days’ pay.

Example

Tourism South East is an organisation formed to promote tourism. The company decided that it was necessary to restructure the business and in January 2004 they announced details of the restructuring as it affected the Tunbridge Wells office. The Tunbridge Wells office was to be closed as part of the reorganisation. Some 26 employees worked at that office, including Ms Hardy. All would need to be dismissed as redundant or redeployed. Ms Hardy complained that TSE had not carried out the statutory consultation. TSE accepted this but said that it was not proposing to dismiss as redundant 20 or more employees at the same establishment.

The tribunal found that, although there were 26 employees at the Tunbridge Wells office which was to be closed as part of the restructuring, TSE then only expected 12 redundancies, with the rest being redeployed. It concluded that the numbers TSE was proposing to dismiss did not reach the requisite number of 20.

Ms Hardy appealed. She claimed that the proposal to close the Tunbridge Wells office was necessarily a proposal to dismiss more than 20 employees as redundant. It was inherent in the proposal that existing contracts of employment would terminate on closure and there would therefore be dismissals. The reason for those dismissals would be redundancy. The fact that it was hoped that some of the displaced employees would apply for, and be offered, different jobs in different parts of the organisation, and in different locations, did not alter this conclusion.

The EAT agreed. Where an employer proposes to dismiss an employee, the mere fact that the employer proposes to redeploy is not decisive. If the employer only proposes to keep the employee in his employment on what is in reality a different contract of employment, he will be proposing to terminate the existing one. Some employees may have been re-deployed but, if so, it would be to jobs for which they would have to apply, in one or two different locations, with fresh job descriptions. The EAT therefore held that TSE should have followed the guidelines as this was a case where collective consultation should have taken place, even though only 12 employees were actually likely to be made redundant.

Fixed term employees

In relation to proposals to dismiss as redundant 20 or more employees, all fixed-term employees are excluded from the collective consultation process unless (i) the employer is proposing to dismiss the employee as redundant; and (ii) the dismissal will take effect before the fixed-term contract was due to terminate.

Note that even if the non-renewal of a fixed-term contract does not fall within the collective consultation regime, it is still a dismissal and other employment rights may be engaged.

Employee representatives

The first step is to consult the representatives of any affected employees. Where those affected are represented by a trade union recognised for collective bargaining purposes, you are required to inform and consult with an authorised official of that union. You are not required to inform and consult any other employee representatives in such circumstances, but may do so voluntarily.

You must inform and consult affected employees who are not represented by a trade union and it’s your responsibility to ensure that consultation is offered to appropriate representatives. In non-union cases, where affected employees have had a genuine opportunity to elect representatives, but fail to do so, you can discharge your obligations by providing relevant information to those employees directly.

Where employee representatives are to be specially elected, you must

  • make such arrangements as are reasonably practical to ensure that the election is fair
  • determine the number of representatives to be elected so that there are sufficient numbers to reflect the interests of all the affected employees, taking into account the number and types of those employees
  • determine whether the affected employees should be represented either by representatives of all the affected employees or by representatives of particular classes of those employees
  • determine that the term of office of employee representatives is of sufficient length to enable relevant information to be given and consultations to be completed.

In addition, the following rules apply:

  1. The candidates for election as employee representatives are affected employees on the date of the election
  2. No affected employee is unreasonably excluded from standing for election
  3. All affected employees on the date of the election are entitled to vote for employee representatives
  4. The employees entitled to vote may vote for as many candidates as there are representatives to be elected to represent them; or, if there are to be representatives for particular classes of employees, for as many candidates as there are representatives to be elected to represent their particular class of employee
  5. The election is conducted so as to secure that:
  • so far as is reasonably practicable, those voting do so in secret and
  • the votes given at the election are accurately counted.

Where an employee representative is elected in accordance with these rules, but subsequently ceases to act as such and, in consequence, certain employees are no longer represented, you should arrange to hold another election.

In a situation where employee representatives are to be specially elected, you must ensure that the election is completed and the representatives are in place (having had an opportunity for appropriate training, if necessary) in time to allow the consultation process to be completed before any redundancy notices are issued.

The representatives will need enough information about the redundancy proposals to be able to take a useful and constructive role in the process of consultation, so you must disclose certain information in writing. The information must be handed to each of the appropriate representatives, or sent by post to an address notified to the employer, or, in the case of a trade union, to the address of the union’s head or main office.

You have to disclose the following information:

  • The reasons for the proposals
  • The numbers and descriptions of employees you propose to dismiss as redundant
  • The total number of employees of any such description employed at the site in question
  • The proposed method of selecting the employees who may be dismissed
  • The proposed method of carrying out the dismissals, taking account of any agreed procedure, including the period over which the dismissals are to take effect
  • The proposed method of calculating any redundancy payments, other than those required by statute, that you propose to make.

There may be special circumstances in which it is not reasonably practicable for you to meet fully the requirements for minimum consultation periods or disclosure of information. In such circumstances, you must do all that you reasonably can toward meeting the requirements.

The Information and Consultation of Employees (ICE) Regulations 2004 give employees in larger organisations rights to be informed and consulted on an on-going basis about issues in the business they work. This includes decisions on collective redundancies.

Note

If you propose to make collective redundancies, you must comply with the requirements described above, even if you have established separate consultation arrangements as a result of the ICE Regulations.

Statute does not specify a time-limit within which consultations must be completed. This will always depend on the circumstances of each case. While consultation must start at least 30 or 45 days before the redundancy notices take effect, it is not necessary that consultation should last for all of that time. Further, where consultation has not been completed by the end of the 30- or 45-day period, you should continue the consultation beyond the 30- or 45-day period.

That said, it is not necessary for the parties to have reached agreement for the consultation to be complete, although you should have undertaken genuine consultation with a view to reaching agreement. Consultation would normally be expected to cover ways of reducing the redundancies or of mitigating their effects, such as alternative work patterns or job share proposals. The consultative process should continue until the issues have been aired and parties have had a reasonable amount of time to comment on information provided and the proposals or counter-proposals which have been made. It is important for the parties to show that they have acted reasonably throughout their dealings. Keep signed copies of any meeting minutes.

Redundancy notices

You can only issue redundancy notices when the consultation has been completed. If consultation has been completed within the 30- or 45-day period, you may issue the notices at that point. You should consult beyond the 30- or 45-day minimum where the consultations are not yet complete.

Redundancy notices take effect at the end of the employee’s contractual or statutory notice period (whichever is the greater).

The redundancy notices do not take effect at the time that they are served upon the employee. The date from the beginning of the consultation to when the employee is actually made redundant (if appropriate) must be at least 30 or 45 days, but in some cases it could be longer, where the combination of the consultation and the notice exceeds the period.

This timetable can be shortened where an employee might have decided to leave early or take voluntary redundancy. For example, employment can be terminated before the end of the statutory or contractual notice period where an employee has agreed to take a payment in lieu of notice.

Complaints

If you don’t comply with the consultation requirements, an employee may make a complaint to an employment tribunal. Complaints about a failure relating to the election of employee representatives may be made by any of the affected employees or by any of the employees who have been dismissed as redundant. A complaint about any other failure relating to employee representatives may be made by any of the representatives to whom the failure related. A complaint about a failure relating to trade union representatives may be made by the trade union. In any other case, a complaint may be made by any of the affected employees or by any of the employees who have been dismissed as redundant.

Where the tribunal finds a complaint justified, it may take steps to safeguard the employees’ remuneration by making a protective award.

TUPE

The Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 20142014 regulations allows collective redundancy consultation to take place before a TUPE transfer. Where the transferee employer intends to make 20 or more redundancies after the transfer, collective redundancy consultation may begin before the transfer if the outgoing employer agrees. In this way, both employers can agree to pre-transfer redundancy consultation and begin consultation at an early stage with elected representatives and employees about the transfer and redundancies at the same time.