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Collective Redundancy Part 1: Five Important Things for UK Employers to Know Now

On 17 April, the Chancellor announced the extension of the Coronavirus Job Retention Scheme (CJRS) until the end of June. For many businesses (and affected individuals) this will have been a relief, but the CJRS is still only temporary and employers should begin planning their furlough exit strategies now. For some businesses, it will not be possible to continue to employ individuals whose jobs do not exist, or whom they do not have the cash to pay, and redundancies will be inevitable.

Where an employer is proposing to dismiss 20 or more employees at one “establishment” in a 90-day period, collective consultation obligations are obligatory. For UK employers who are anticipating large-scale redundancies following the expiry of the CJRS, it is vital to understand these obligations to avoid unnecessary delays, costs and legal risk in the coming weeks and months.

UK employers should consider the following five important points in relation to collective consultation:

1. Trigger: As stated above, collective consultation is required where an employer proposes to dismiss 20 or more employees at one establishment in a 90-day period. It follows that if employers are already proposing to make 20 or more dismissals once furlough leave has ended, they should be collectively consulting now. See part two of our series for help with understanding some of the jargon – such as the meaning of a proposal, whether different sites count as separate establishments, who is an affected employee and what is required in terms of collective representation.

2. Consultation period: The employer must start consulting with elected representatives of the affected employees 30 days (or 45 days if 100 or more redundancies are proposed) before any notice of redundancy takes effect. Where this is not reasonably practicable and “special circumstances” exist, employers might be absolved from full compliance with their consultation obligations. However, while the global pandemic is unprecedented and unique, its effect on businesses is unlikely to amount to “special circumstances” and it is advisable for employers to comply to the fullest extent possible to avoid potential sanctions for non-compliance (see further below).

Updated Government guidance published on 30 April has confirmed that furloughed employees are able to undertake “union or non-union representative duties and activities for the purpose of individual or collective representation of employees or other workers” without breaching furlough arrangements which prohibit employees from carrying out ‘work’ for their employer. This will allow employers to begin consultation while affected employees are on furlough leave so that resulting redundancies may dovetail with the end of furlough leave.

3. Elected representatives: The employer’s duty is to consult with representatives of the affected employees (with separate individual consultation with the particular employees who are at risk of redundancy). Unless there is an existing elected employee body, or a trade union recognised by the employer, employers must arrange the fair election of appropriate representatives – which means facilitating a secret ballot, ensuring that all those eligible to vote can do so, and fair counting of votes. Where the affected employees are all working from home, there are some obvious practical issues for employers to consider – for example, how to conduct a fair and secret ballot online. Arrangements would also need to be made to conduct consultation meetings remotely while Government guidance relating to social distancing remains in place. Many businesses have become quickly adept at using virtual means of communication (e.g. Skype, Microsoft Teams or Zoom) in place of face-to-face meetings over the last few weeks and so will not be fazed by this. It is also helpful to know about organisations like Civica (formerly Electoral Reform Services) who provide election management services.

4. Notification: Employers are obliged to notify the Secretary of State (for Business, Energy and Industrial Strategy) on a ‘Form HR1’ at least 30 days before the first dismissal takes effect where proposing to dismiss 20 to 99 employees, or 45 days prior to then where proposing to dismiss 100 or more employees (in each case at one establishment within a 90-day period). 

5. Sanctions – Failure to comply with the consultation obligations entitles all employees who are made redundant (regardless of length of service) to claim compensation of up to 90 days’ pay per person in a tribunal. This is known as a protective award. It is also a criminal offence not to comply with notification requirements, attracting a potentially unlimited fine and, where the failure is found to have been committed with the consent or connivance of, or is attributable to the neglect of, any director, manager, secretary of similar officer of a company, that individual may also be criminally liable.

If this is a topic of interest, you may also like to read Part 2 of this series, which deals with some of the paramount issues you need to get right when dealing with collective redundancies. 

If you would like to discuss the matters raised in this alert further or are considering taking steps to implement redundancies and/or other measures, or for guidance on your specific rights, responsibilities and potential liabilities, please contact Partner Merrill April, who specialises in partnership and employment law issues for multi-national employers, senior executives, firms and partners.