Large scale redundancies – the basic toolkit

An amended version of this article originally appeared in the July 2020 issue of the Employment Lawyer’s Association Briefing. The authors have also recorded a webinar discussing collective redundancies, which can be found here

On 23 March 2020, the Prime Minister addressed the nation and ordered that the British people enter into a period of lockdown, to slow the spread of COVID-19. Many businesses, however, had already been shutting up shop, whilst customers and clientele had already started staying away. The impact on many businesses and the wider economy has been devastating. At the beginning of June, it was revealed that the UK’s economy shrunk by over 20% and there are rumours that various well-known brands are teetering on the brink of insolvency. 

Until now, the Coronavirus Job Retention Scheme has been a lifeline to many businesses – and the individuals they employ. By covering large proportions of the wage bill, the government can be said to have avoided many businesses both laying staff off and going into insolvency proceedings themselves. 

However, no good thing lasts forever. 10 June 2020 marked the last day that employees could be placed on furlough, and over the next few months the contributions towards wages that the government pays as part of furlough will reduce significantly. 

Furthermore, a number of big name businesses – such as British Airways, BP, Centrica and Rolls Royce – have already started the ball rolling on mass redundancies. To put it in context, those four businesses alone plan to make approximately 36,000 people redundant. 

For employment lawyers, this likely means that our clients will shortly be shifting their focus from advice about the furlough scheme to redundancy consultations. Collective redundancies, in particular, offer a number of risks for the unwary. 

When is the obligation to collectively consult triggered? 

It is easy, when presented with a plan to axe dozens of jobs, to leap to the conclusion that this must be a collective redundancy situation. However, that is not always the case. 

Collective consultation obligations are only triggered if the proposal is to make more than 19 employees redundant at one establishment within a 90-day period (s188 of the The Trade Union and Labour Relations Consolidation Act 1992 – which implements the The Collective Redundancies Directive 1998). Thus, a supermarket chain (for example) proposing to make 10 redundancies in five different stores may be able to do so without needing to collectively consult. 

However, what amounts to an “establishment” is not always straightforward. At one point, the jurisprudence suggested that the number of redundancies across different workplaces should be aggregated, to establish how many redundancies overall were proposed. The ECJ moved away from that approach in USDAW and anor v EthelAustin Ltd and ors [2015] ICR 675  (better known as the Woolworths case). In that case, the ECJ held that the term “establishment” meant the unit that the individual was assigned to in order to carry out his/her duties. In the hypothetical case of a supermarket chain, it is likely to be the individual stores. If none of the stores being closed employ 20 or more people, most likely there will be no requirement for collective consultation (although this will turn on the facts). 

If an employer proposes to make 100 employees or more redundant in a period of 90 days or less, that employer must give an HR1 notice to the Secretary of State. Failure to do so is a criminal offence. 

A proposal to dismiss? 

It is also important to be aware that the obligation to collectively consult is triggered once the employer has a proposal to dismiss. This gives rise to the question of what amounts to a proposal

The stage at which obligations are triggered under TULRCA 1992 (when the employer is “proposing to dismiss”) is arguably later than under the Directive (when the employer is “contemplating collective redundancies”). Under the Directive, it appears that the duty to collectively consult 

is triggered before any decision to dismiss has been taken. The UK approach, articulated in UK Coal Mining Ltd v National Union of Mineworkers (Northumberland Area) [2008] ICR 163, suggests that the obligation is not triggered until the plan is “fixed as a clear, albeit provisional, intention”, rather than when it is merely “mooted as a possibility”. In Akavan Erityisdojen AEK v Fujitsu Siemens Computers [2009] IRLR 944, the ECJ appeared to close the distinction somewhat, holding that the obligations are triggered “once a strategic or commercial decision compelling [the employer] to contemplate or plan for collective redundancies has been taken”. This suggests that at least some decision must have been taken (although the decision in Akavan is not without criticism). 

That said, if the subject matter of a collective consultation is to include genuine consultation on avoiding or reducing redundancies, it cannot be right that an absolute decision can have been reached before it is commenced. Equally, there is the requirement that the collective consultation be carried out “in good time” to allow it to be meaningful. If the employer commences consultation so late in the process that these decisions have already effectively been made, then it is unlikely that consultation was commenced “in good time”. 

What should the timetable look like? 

Under s188(1A) TULRCA 1992, where it is proposed there will be 100 or more redundancies at a single establishment within a 90 day period, the consultation must start no less than 45 days before the first dismissal takes place. Where there are fewer proposed redundancies, that period is reduced to 30 days. 

However, these time periods do not override the requirement that consultation be started “in good time”. This means that the consultation period must be sufficient to ensure that fair consultation can take place before the first dismissal happens (Amicus v Nissan Motor Manufacturing (UK) Ltd [2005] 7 WLUK 790). So there may well be circumstances where the employer has to consider if there are reasons why it should commence consultation at an earlier stage. 

Equally, the statutory minimums do not set out how long the consultation should be, or indeed when it should start, merely the absolute minimum period of consultation. In Amicus, the EAT made no criticism of the employer’s two week consultation period, on the basis that it had commenced well in advance of 30 days before the first dismissal; that the consultation itself was shorter than 30 days was immaterial. That said, just because the consultation ends sooner does not mean that dismissals can begin earlier. No dismissal should be made until the end of the 30 / 45 day period. 

One other factor to consider when working out the timetable is who you are consulting. Consultation cannot start until there are representatives to consult with. So if representatives have to be elected (discussed below), this needs to be done in advance. The 30 / 45 day minimum period cannot include the election process itself. 

Employee representatives 

The employer’s duty is to consult with “appropriate representatives”. This begs the question: what is an appropriate representative? 

For workforces represented by an independent trade union which is recognised (under s178 TULRCA 1992) by the employer, the process is simpler: the employer need only consult with the representatives of that trade union, provided that all the affected employees are “of a description” in which an independent union is recognised by an employer. So, in the supermarket chain example, if there were a recognised trade union that represents warehouse staff, then the trade union representatives can represent all warehouse staff that are affected – including those individuals who are not paid up members of the union. However, if the union is not recognised in respect of checkout staff, for example, then union representatives cannot represent checkout staff – even if some of them are members of that union. 

In the absence of a recognised trade union, the employer must either consult with either existing employee representatives (if there are any) or arrange for employee representatives to be specially elected for the consultation. 

If there are existing employee representatives, they must have “authority from those employees to receive information and to be consulted about the proposed dismissals on their behalf” (s188(1B)(a)(i) TULRCA). This does not need to be a group of representatives specifically elected for purpose of redundancy consultations, but they must have the authority and remit to discuss redundancy issues. However, standing employee representatives with such authority are now relatively rare and, even if they do exist, the employer can still choose to consult representatives elected specifically for the collective consultation. 

Where employee representatives need to be elected, the employer must give a reasonable time in which employees can stand and be elected as representatives. There are a number of requirements to think about at s188A(1) TULRCA 1992, the headline points being: 

  • The employer must take steps to ensure the election is fair, including ensuring all affected employees can vote, that the ballot is as secret as possible and that votes are accurately counted. 
  • The employer must decide the number of representatives, what sections of the affected employees they represent and how long their term will be. 
  • Only affected employees (at the date of the election) may be candidates, and no affected employee may be unreasonably excluded from standing. 

If no one comes forward to be a representative, the employer may consult with the affected employees directly. 

Content of the Consultation 

The employer must consult about ways of: (a) avoiding the dismissals, (b) reducing the number of employees to be dismissed; and (c) mitigating the consequences of the dismissals (s188(2) TULRCA 1992). It is for the employer to show that each of these facets have been meaningfully consulted upon – it is not enough that the consultation process simply allows employees a forum to air their views and put forward alternatives. 

The information that must be provided to employee representatives is prescribed at s188(4) TULRCA 1992. This includes the reasons for the proposal, the number and description of affected employees, the total number of employees of that description in the establishment, the proposed method of selection for redundancy, the proposed procedure and timing of redundancies, how any redundancy payments will be calculated and, in respect of agency workers, how many there are, what parts of the business they work in and what work they are doing. Where an HR1 notification is required, this must also be provided. 

It had previously been thought that such information should be provided before the consultation begins. However, following the decision in Securicor Omega Express Ltd v GMB [2004] IRLR 9  case, it seems that precisely when the information is provided is not, by itself, critical – what matters is whether the information was provided with enough time to allow meaningful consultation to take place during the consultation period. 

Finally, an employer will likely still need to undertake some form of individual consultation as well as a collective consultation, as s188 TULRCA 1992 does not replace the employer’s obligations under Part X of the Employment Rights Act 1996. 

Conclusion 

The fear of collective redundancies can cause some employment lawyers sleepless nights. But with a practical, well thought out plan in place and by following the rules set out in the Directive and TULRCA, dealing with these issues should be straightforward. We hope this article has given you a good foundation on which to build your advice. 

This article was written by Tim Goodwin and Henry King, tenants of 12KBW.

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