Employment law- Collective redundancies
What is a collective redundancy?
If an employer is proposing to make redundant 20 or more employees at “one establishment” (see below) within 90 days, this will amount to a collective redundancy. If this is the case, then legal requirements regarding collective consultation will apply.
The proposed dismissal in a collective redundancy situation will specifically not be about an individual’s performance or conduct. It will cover large scale redundancy situations such as downsizing or site closures.
The law requires a business to start consulting with either a recognised trade union or elected employee representatives (who may already exist or alternatively would need to be elected in accordance with rules set out in the legislation).
What does “one establishment” mean?
One of the most important issues in the redundancy exercise is – what amounts to “one establishment” where the redundancies are taking place? This can be a tricky issue, but the courts have ruled that an “establishment” usually refers to each individual branch or store (the latest ruling being in December 2018).
The key is whether your place of work is a “distinct employment unit”. For example, if your workplace has its own management structure and employees are assigned to work at one location rather than across multiple sites, it is more likely to be classed as a separate establishment. A classic example is a branch of a high street bank. Each branch serves its own customers, has its own employees and managers, and is likely to be a separate establishment even if HR (for example) is managed by Head Office.
What is the role of elected employee representatives?
The purpose of elected employee representatives is to represent your interests during the forthcoming redundancy consultation exercise. The representative will take an active part in collective consultation meetings with the organisation by:
-discussing how the consultation process should proceed;
-representing the employees’ views in consultation meetings;
-exploring ways in which redundancies could be avoided or reduced;
-discussing what support and assistance affected employees require and what the elements of any redundancy package should be;
-reporting back to the other employees on the outcome of the collective consultation meetings with the organisation.
How does the appointing of employee representatives work?
It is up to your employer to decide whether there should be representatives from each ‘class’ of employees (e.g. from a particular part of the business) or whether elected representatives should represent all the affected employees.
There are detailed rules set out in the legislation which essentially require the following:
- the employer must ensure the election is fair, as far as reasonably practical;
- the employer decides how many representatives will be elected, but should ensure that the number is sufficient to represent ‘all affected employees’;
- candidates must be affected by the redundancy proposals;
- no affected employee should be unreasonably excluded from standing;
- all affected employees should be entitled to vote in the election;
- voting should be in secret if possible, and the employer should ensure votes ate accurately counted.
If employee representatives need to be elected, consultation cannot start until this has taken place – any elections should take place before the obligatory 30 or 45 day period begins.
What if there is a failure to elect employee representatives?
If the employees fail to elect representatives within a reasonable time after your employer has invited them to do so, then each affected employee must be provided with the necessary information individually. This includes the reasons for the proposals, the numbers and descriptions of employees who it proposes to dismiss for redundancy, the proposed method of selecting the employees who may be dismissed and the proposed method of carrying out the dismissals.
What information is required by law to be disclosed to the employee representatives before consultation begins?
Your employer is required by law to disclose the following information in writing to the appropriate representatives at the outset of the process, and before consultation commences:
- the total number and description of proposed redundancies;
- the proposed selection method;
- the proposed procedure and time limits for carrying out the redundancies;
- if there is any way to avoid the redundancies;
- the reason for the proposed redundancies.
What must the consultation include in collective redundancies?
The obligation to consult is in respect of ALL affected employees, even if not everyone is put at risk. This is because the proposals will result in changes to the wider workforce including allocation of volume of work.
The consultation process with the representatives must include “meaningful consultation” with a view to reaching agreement on ways of:
- avoiding the redundancies;
- reducing the numbers at risk;
- mitigating the effect of the dismissals on affected employees.
What are the minimum periods of consultation?
Your employer needs to consult in good time, and no less than:
- 30 days before the first dismissal if there are 20-99 proposed redundancies, and
- 45 days before the first dismissal if there are 100 or more proposed redundancies.
No dismissals should take effect until consultation is complete and the minimum notice above has been given. If this does happen, then you could be entitled to a “protective award” (see below).
The employer’s duty to collectively consult starts when the redundancies are “proposed”. Case law has established that redundancies are “proposed” when the employer “contemplates” a strategic or commercial decision which, if taken, would inevitably lead to redundancies. This is a tricky area and the earlier on in the process the employer starts consulting, the more likely it will have complied with its legal obligations.
If an employer embarks on consultation after giving notice of dismissal to any employees, this will not comply with the legislation.
Collective consultation is different to individual consultation. By carrying out collective consultation, employer is not absolved of responsibility to individually consult with each employee who is at risk of redundancy (see our main page on redundancy for more information about individual consultation).
How can collective consultation benefit employees in a redundant situation?
A trade union or employee representatives could argue on behalf of affected employees that they are prepared to work shorter hours, take a salary cut or forgo bonuses in an attempt to avoid the propose redundancies being made. Other suggestions may include proposing voluntary redundancies, staff retraining, early retirement, a recruitment freeze, and cutting back on agency or other temporary workers and contractors.
Am I still entitled to individual consultation with my employer in a collective redundancy situation?
Yes, individual consultation is required in all cases, regardless of whether there is an obligation to consult collectively. You may otherwise have a claim for unfair dismissal.
What are the remedies for an employer’s failure to consult?
The remedy for breach of the collective consultation rules is a “protective award” of up to 90 days’ pay for each affected employee, which is an effective and penalising remedy against the employer. The claim must be brought by the recognised trade union or employee representatives if they are in place, otherwise the claim can be brought by each individual affected employee.
Unlike many other employment claims, you do not need to have been employed for two years to qualify for a protective award if your employer has not complied with collective consultation obligations. This means that you may qualify for a protective award, even if you do not yet qualify for statutory redundancy pay.
A claim must be presented to an Employment Tribunal within the period of three months less one day of the date on which the last of the dismissals takes effect.
An employer has a defence to such a claim where it can show that there were special circumstances which meant consultation was not reasonably practicable, although this is not an easy defence to raise. An employer would have to show that a ‘sudden and unexpected’ disaster had struck the company meaning that it was ‘not reasonably practicable’ to consult with employees. This is very difficult to prove and even the business going insolvent does not usually meet the threshold unless there were unusual and exceptional circumstances.
Notifying the Secretary of State
An employer must also disclose in writing to the appropriate representatives certain information concerning the proposed dismissal, and notify the Secretary of State for Business Innovation and Skills 30 or 45 days (depending on the number of dismissals) before the first dismissal takes effect. The notification must be in a specific form and must include the names of the employee representatives and the date the consultation began.