With some employment tribunals closed and all contested hearings up to 26 June 2020 having been postponed (and converted to preliminary hearings by telephone), there are fewer key cases to update you on this month.
Instead, we have decided to focus on redundancies and collective consultation as, unfortunately, many businesses are now looking ahead to ‘life after furlough’ and considering whether they might need to restructure or make some changes to terms and conditions.
The Coronavirus Job Retention Scheme
It is currently unclear whether the Coronavirus Job Retention Scheme, having already been extended once, will be extended again beyond the end of June, and whether the government might make any changes to the scheme to allow employees to carry out some work for their employers while still being able to benefit from the scheme. Nevertheless, once any available government support schemes are exhausted, many employers will feel they have no option other than to consider making redundancies in their workforce due to a reduction or complete cessation of work.
Covid-19 may also be a catalyst for other businesses to consider restructuring or making permanent changes to ways of working, for example where they are realising that it is possible for more employees to work from home. As will be explained later in this blog, collective consultation may also be relevant in these circumstances.
Redundancy can be a complex area of employment law and the financial penalties can be severe where the correct process is not followed in terms of selection and consultation, so it is important to get it right.
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!
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.
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.
Other Important Updates
Although it has been easy to miss this year, April is the month when statutory rates are increased.
The changes are as follows:
National Minimum/Living Wage
The NMW/NLW rates are as follows:
Age range (years) From 1.4.19 From 1.4.20
25+ 8.21 8.72
21-24 7.70 8.20
18-20 6.15 6.45
16-17 4.35 4.55
Apprentice 3.90 4.15
Other statutory rates
Rate: Statutory Sick Pay
Current rate (per week): £94.25
Rate from April 2020: £95.85 (6.4.20)
Rate: Statutory Maternity/Adoption/Paternity Pay and Shared Parental Pay
Current rate (per week): First 6 weeks at 90% of salary and then 33 weeks at £148.68
Rate from April 2020: First 6 weeks at 90% of salary and then 33 weeks at £151.20 (5.4.20)
Rate: Lower Earnings Limit
Current rate (per week): £118
Rate from April 2020: £120
Rate: Maximum amount for a week’s pay
Current rate (per week): £525
Rate from April 2020: £538
Rate: Maximum amount for a compensatory award
Current rate (per week): £86,444 or the employee’s annual salary, whichever is lower
Rate from April 2020: £88,519 or the employee’s annual salary, whichever is lower
The Vento guidelines (to determine amounts paid for injury to feelings in a discrimination case):
Lower band (less serious cases): £900 - £9,000
Middle band: £9,000 - £27,000
Top band (most serious cases): £27,000 - £45,000