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Redundancy - The Legal Basics


Whenever an employer plans to make redundancies, where the employees in question are entitled not to be unfairly dismissed, the employer must follow a fair process which is likely to involve consulting with the potentially affected employees individually.

There are however special additional considerations where an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. These are known as collective redundancies.

Where collective redundancies are proposed, an employer must consult on its proposals with appropriate representatives of the affected employees and must also notify the Department for Business, Energy, Innovation and Skills.

The appropriate representative might be a trade union, or elected employee representatives.

The consultation with the appropriate representatives must begin “in good time”, however there are prescribed minimum time periods between the beginning of the consultation and the first dismissal taking effect. Where between 20 and 99 redundancies are proposed, the relevant time period is 30 days. Where 100 or more redundancies are proposed, the relevant period is 45 days.

Consultation must begin with specified information on the proposals being provided to the representatives. One practical consideration for employers will be whether they are able to start redundancy consultation whilst employees are delegated as furloughed and, if so, when and how.

As a minimum, employers must try to agree with the representatives ways of avoiding redundancies, reducing the number of them, or mitigating their consequences, which will be more difficult to do with social distancing requirements in mind.

Should an employer fail to comply with the rules on information, consultation or election of representatives, it could find itself open to a claim on behalf of the employees for a protective award in the employment tribunal. The maximum award (known as a “protective award”) is up to 90 days’ gross pay for each dismissed employee, which is one of the most expensive liabilities that an employer may face in employment law.

Some thorny issues

There are a number of thorny issues or problem areas in the law around collective consultation which employers should be aware of. These are summarised below.

When is the duty to consult triggered?

An employer’s duty to consult is triggered at such time that it is “proposing” to make 20 or more redundancies within a period of 90 days or less. A proposal is likely to be less well developed than a decision, but is more than a mere contemplation. Employers will be at risk of being found to have breached the legislation should they only begin consultation once they have made a decision to dismiss so they will need to think carefully about timings and when the obligation is triggered.

Multiple waves of redundancies

An employer might make one batch of redundancies and later decide it needs to implement a further batch. Where the total number of redundancies is 20 or over, and where both batches would fall within a 90 day period, it is possible the employer would be expected to have consulted in relation to both batches. The law is not settled on this point but may depend on whether the second batch was contemplated or proposed before the first batch was implemented. Care therefore needs to be taken where redundancies are made in ‘waves’ and when individual consultations have already taken place.

The meaning of “establishment”

The duty to consult will be engaged where 20 or more redundancies are proposed at one establishment. An “establishment” is the entity (or "local employment unit") to which the workers made redundant are assigned to carry out their duties, and it is not essential that the unit or entity has its own management which can independently effect collective redundancies. Identifying the right establishment(s) will be a key part of your planning. Get this part wrong, and the consultation that follows will be flawed.

Wide meaning of “redundancy”

For the purposes of collective consultation, a dismissal by reason of redundancy has a wider meaning than redundancy in the context of statutory redundancy payments or unfair dismissal. In this context it means "not related to the individual concerned or for a number of reasons all of which are not so related".

For example, employers planning a business reorganisation to be carried out through termination and re-engagement on different terms and conditions would count towards dismissals by reason of redundancy. Employers therefore need to be aware that the duty to consult can arise in the context of reorganisations and to ensure they are counting all of the dismissals which should be counted towards the threshold of 20 or more, so be warned!

Voluntary redundancies

Where employees volunteer to take redundancy, it may not always be necessary to consult with appropriate representatives on their behalf. However, such individuals should still be counted towards the number of dismissals by reason of redundancy which could trigger the duty to consult.

Electing representatives

Where there is no relevant trade union representation, employers will need to consult with representatives elected by the affected employees. This will either mean representatives elected by the affected employees for the purpose of consultation on a particular redundancy proposal, or a standing body of elected representatives already in existence.

Where there is no recognised trade union it is up to the employer to decide whom to consult. Often the safest option will be to consult with directly elected representatives.

The election of elected representatives for the specific purpose of collective consultation is governed by statutory rules. Employers should take care to follow these rules, as a breach could give rise to a claim for a protective award which could be as much as 90 days’ gross pay. There is no specific timeframe for the election of employee representatives however consultation cannot start until after the representatives have been elected. Employers must follow the statutory rules which include that they must make such arrangements as are reasonably practicable to ensure the election is fair.

What does the duty to consult involve?

The duty to consult requires employers to consult with the representatives “with a view to reaching agreement” on ways of avoiding redundancies, reducing the number of them, or mitigating their consequences. An unwillingness on the part of the employer to seek agreement could lead to a protective award being made against them.

Clearly this may cause difficulty for some employers where they have little choice practically but to make some of their employees redundant, or at the very least make consultation seem an artificial process. It will be important that employers can show they have discharged their duty by being open minded and consulting at the right time.

Overlap with individual consultation

Where the duty to consult on proposed collective redundancies is triggered, this does not remove an employer’s duty to consult individually. It is also clear that the way in which collective consultation is carried out may be relevant to the issue of fairness should a dismissed employee bring an unfair dismissal claim.

The timing of a notice to terminate

Once the period of collective consultation is complete, employers need not wait until the end of the 30 or 45 days to issue a notice of dismissal. However, such notice must not expire before the end of the relevant period.

It is important that employers get the timing right if the period of consultation does not last for the full 30 or 45 days.

If you have any questions regarding the redundancy process please contact a member of our employment team.  

Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.