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Employment Law

Collective Redundancy

What is a ‘collective redundancy’?

Collective redundancy is where an employer seeking to make redundancies puts 20 or more employees at risk at one establishment within a period of 90 days. This means that where an employer has sought to make redundancies on separate occasions but within 90 days, and putting at least 20 employees at risk of redundancy in total, then this can still be deemed a ‘collective redundancy’ and the relevant rules will apply. What is important is the number of employees at risk, not the number who are actually made redundant at the end of the process and this also includes any voluntary redundancies.

Further, the relevant employees must be at one ‘establishment’. For the most part this can be easily determined. However, there have been cases where two or more sites have been deemed to be part of one establishment, thus it is worth taking advice if there is any uncertainty.

Duty to consult with employee representatives

Like the usual redundancy rules a consultation is required to be carried out by the employer with union representatives (if there are any) or the elected employee representatives before dismissals can be effected. The consultation process cannot begin with elected representatives until they have been properly nominated and elected which will add time to the process.

For 20-99 employees at risk of redundancy the minimum period of consultation is 30 days before anyone can be dismissed. Where the number of employees is 100 or more the minimum period extends to 90 days consultation. In addition, the employer must notify the Department for Business, Innovation and Skills of the proposed redundancies. Failure to do so can result in a substantial fine of up to £5,000.

Consultation process

The consultation process itself is very similar to that for individual redundancies. It involves providing information to the employee representatives, making suggestions and considering suggestions from them with a view to reaching an agreement in an attempt to reduce the number of redundancies by considering what other options are available. Employee representatives must be given certain information by the employer such as the reasons for the proposed redundancies, the number at risk of redundancy and the method of calculating the redundancy payments, etc.

The employer has extensive responsibility in the collective redundancy process. For example, the employer is under a duty to ensure that even the employee representatives are properly elected and know their duties throughout the process. Employers may want to invest in impartial training to ensure that the elected representatives know their duties as this will eliminate an element of risk for potential future liability.

Failure to consult

Employers should be wary of the failure to consult or failure to consult properly since the result of a complaint to the Employment Tribunal (ET) can be very costly for them. Employees affected by collective redundancy also have their individual redundancy right to be consulted, a failure to comply with which can lead to claims for unfair dismissal for each individual employee affected by the collective redundancy (who qualify for unfair dismissal). Employees can also complain that their collective redundancy consultation right was not fulfilled correctly which can result in the ET making ‘protective awards’ against the employer.

Protective awards

A ‘protective award’ is where the ET declares that the employer must pay employees a week’s pay for each week in the ‘protected period’ whether the employee was working or not.  The ET will award what it considers to be ‘just and equitable in all the circumstances having regard to the seriousness of the employer’s default’. The maximum award for affected employees is substantial – 90 day’s pay – and this is the maximum irrespective of whether the relevant consultation period is 30 or 90 days. The protective award is calculated from the employee’s actual weekly gross pay and there is no cap on this amount (unlike other employment claims). Further, every employee affected by the failure to properly consult may be entitled to the maximum, which can amount to a cost of at least 20 claims for up to 90 day’s pay. In practice if an employee submitting such a claim to the ET were successful, then the ET would grant the same award to the remaining affected employees (if they claimed within the prescribed time limit).

Protective awards act as a punishment for employers who fail to follow the correct procedure rather than to simply compensate employees. This is exemplified in the fact that employees do not need to be dismissed in order to have a successful claim. The award is paid to employees for the loss of days of consultation, irrespective of whether any financial loss ensued. Further, employees may not have been properly consulted but may still have been in employment for the protected period, despite which the salary paid throughout that period is not capable of being offset against the protective award made by the ET.

There are rare circumstances where a failure to consult with employees will not result in successful protective awards claims. This is where unforeseen sudden physical or financial circumstances make it necessary for the employer to cease trading. However, employers should be wary of the consequences of failing to consult and claiming insolvency as a special unforeseen circumstance as the ET has not shown to be very sympathetic in these circumstances, even where liquidators, receivers or administrators have come in at very short notice and have made immediate redundancies.

Employers who have concerns or need advice about making collective redundancies and its implications should contact John Carruthers Solicitors and Solicitor Advocates who providespecialist legal expertise and can advise you on your particular circumstances.

For expert legal advice call now on: 0141 332 0915

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