REDUNDANCY – COLLECTIVE CONSULTATION – A REMINDER
The recent publicity surrounding hundreds of former workers at a Derbyshire clothing factory who were made redundant following its closure, are to receive a payout of more than £1 million, acts as a reminder of the need to follow correct procedure.
In this case, more than 300 workers were told in May last year that they had lost their job, when the firm went into administration. The workers claimed they had not been consulted properly on the redundancy plans. The Employment Tribunal ruled that 314 workers should be awarded compensation worth an estimated £1.13 million. It means that each worker should receive in the region of £3,600 each. As the firm no longer exists the compensation is likely to be paid from the National Insurance Fund.
Consultation on redundancy is required on two levels. Firstly, legislation sets out specific circumstances under which you must “Collectively” consult with appropriate representatives. Secondly, case law has clearly established that you must always consult with employees at risk of redundancy on an individual basis.
Consultation timescales as set by legislation are as follows:
Number of employees at one establishment proposed to be dismissed as redundant. **
Minimum period of consultation before the first dismissal takes place.
100 or more within 90 days
20 or more within 90 days
Less than 20
* None required by law but it is recommended that at least 14 days consultation be given on an individual basis.
** The 20/100 should include redeployments (where there is no contractual mobility clause) and volunteers (providing they are volunteering for dismissal on grounds of redundancy). The 20/100 does not need to include fixed term workers where the contract is coming to a natural end.
You are required to consult with ‘appropriate representatives’ of any of the employees who may be affected by the proposed dismissals or by any measures taken in connection with those dismissals. "Appropriate representatives" will be either:
- trade union representatives (provided you recognise the trade union for the affected employees); OR
- employee representatives elected specifically for the purpose of a redundancy consultation exercise OR those already elected as part of your employee relations practices.
If you already recognise an Independent Trade Union you MUST choose option a).
Consultation must be meaningful and genuine and must include discussion about ways of:
- avoiding the dismissal
- reducing the numbers of employees to be dismissed, and
- mitigating the consequences of the dismissals.
During collective consultation, you have a statutory duty to provide a written disclosure of certain specified information and if you are in this situation, you are advised to seek specialist advice.
If you fail to comply with statutory consultation procedures, then a complaint may be made to an Employment Tribunal. The maximum penalty could be an order by the Employment Tribunal to make a Protective Award to those dismissed, or proposed to be dismissed, of up to 90 days’ pay, which is what happened in the above case. This could be in addition to any award for unfair dismissal.
Some Other key legal requirements
Other key legal requirements, irrespective of the number of workers at risk of redundancy, to be considered are:
- It must be a genuine redundancy i.e. meets the legal definition of redundancy and not just another way of getting rid of a bad performer.
- Suitable, meaningful, and appropriate consultation must be carried out. Not just with employees in jobs that are at risk but also with those employees who will remain but are affected by the change.
- Consideration of alternatives and volunteers. Where vacancies exist in other parts of the organisation it will be essential to consider them during consultation as possible opportunities for re-deployment. Requirements to allow trial periods and ‘suitability’ are key.
- If compulsory selection is required then it is essential that a fair and objective approach is taken. Many different criteria have been used to select for redundancy and the best advice is to use those that can be evidenced by measurable factual data.
- Severance pay in the form of Redundancy Pay is again prescribed by law based on a statutory scale of payments based on age, service and rate of pay as at the effective date of termination. The limit of the amount of a weeks pay for the purpose of calculating redundancy pay is £479.00 (increasing to £489.00 with effect from 06/04/2017).
- Contractual consideration must also be taken to ensure any relevant terms in the contract of employment are applied e.g. enhanced pay, notice periods etc.
- A fair process of dismissal will be required.
- Notification to the Secretary of State is required if 20 or more jobs are proposed as redundant.
- Time off to look for work or arrange training.
If you are planning to dismiss an employee, please seek advice beforehand. If you do dismiss an employee unfairly it could be costly! The maximum compensatory award for unfair dismissal is a year’s pay capped at £78,962 (increasing to £80,541 for dismissals after 06/04/2017) (plus basic award).
Legal Expenses Insurance
If you have taken advantage of legal expenses insurance providing protection against Employment Tribunal defence costs and awards, it is a usually a condition of that insurance that you have taken advice from the helpline before taking action. Failure to do so may well result in your insurance being invalidated.
In any event it is always better to check with a specialist before taking any action against an employee and if you are contemplating such action or would like a quote, without obligation, please contact us on 03456 446 006.