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Collective Redundancy Part 2: Five Tricky Issues

This is the second article in our two-part series focussing on collective redundancies. Since the release of Part 1, the Chancellor has announced that the government’s Coronavirus Job Retention Scheme (CJRS) will be further extended until the end of October. However, UK employers who anticipate that redundancies may be necessary either before or at the end of the CJRS should be considering now (and on a continuous basis in the coming weeks and months) whether collective consultation obligations have been, or may be, triggered.  

As a reminder, in the UK, collective consultation obligations will arise (under s.188 of Trade Union and Labour Relations (Consolidation) Act 1992 (TULCRA)) when an employer is proposing to dismiss 20 or more employees as redundant at “one establishment” in a 90-day period. Failure to comply with the obligation gives rise to a potential claim for all affected employees of up to 90 days’ actual pay – so the risk of getting it wrong is significant, particularly in large businesses.

In this article, we will be looking at five tricky issues which arise from the real-life application of this legal threshold and the obligations it triggers.

1. What is a “proposal” to dismiss?

Case law suggests that a proposal is more than a mere contemplation of the possibility of redundancies but is less than an actual decision to make redundancies. The exact tipping point on this spectrum is not clear cut and the question will be a factual one in each case, which makes it difficult for employers to judge when the obligations are triggered.

Importantly, an employer cannot properly consult over something that they have already decided to do, and consultation must therefore begin while the proposals are still at a formative stage, while the employer still has an open mind. It follows that if an employer is proposing to do something (for example, close a site) that would necessarily lead to redundancies, or if making redundancies is one of a very limited number of options that an employer will need to take (for example, at the end of CJRS), then it is likely that there is already a “proposal” to dismiss by way of redundancies, and (assuming the other elements of the definition are met) collective consultation should be commenced.  

2. What is “one establishment”?

The exact meaning of “establishment” has been the subject of a long line of case law. Despite confusing indications to the contrary at various stages of the Woolworths case (USDAW v Ethel Austin), it is now reasonably clear that establishment means the geographical location in which the workers to be made redundant are assigned to work. In that case, this meant that only those Woolworths employees who worked in stores employing 20 or more staff were entitled to protective awards for failure to consult when the well-known retailer went into administration.

This is not to say that an employee’s usual place of work is always conclusive – there are often complexities within the apparently simple definition. Employees who work at multiple sites and premises (for example, a nationwide sales team) can be defined as being assigned to “one establishment” taking into account the organisational structure of the business.  The question is again ultimately one of fact and employers should not seek to avoid the “one establishment” definition by artificially dividing a workforce. 

3. Who are affected employees?

The consultation obligations under TULCRA apply to “employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals”. The duty of consultation does not extend to workers or self-employed contractors, nor fixed term employees who have been dismissed at the expiry of their contract. Fixed term workers who have not yet reached the expiry date of their fixed term contracts should be included in the consultation. The term “affected” extends beyond those who are immediately at risk of dismissal to include those affected by measures associated with the redundancies. “Measures” is not expressly defined but is likely to be given a wide interpretation to include any organisational step taken in connection with or as a result of the proposed redundancies, including redistribution of work or internal restructuring. 

4. What about multiple redundancies within the same 90-day period?

Another tricky question arises where an employer proposes to make more than one batch of redundancies. When does the 90-day period start and end for these purposes?

The basic rule is that, when determining the number of dismissals proposed in one period, no account is taken of employees in respect of whom redundancy consultation has already begun. For example, if an employer has proposed 30 redundancies (Batch 1) and has begun collective consultation in respect of those dismissals, and subsequently proposes to make another 10 redundancies (Batch 2) within the same 90-day period, there will be no obligation for the employer to collectively consult in respect of Batch 2 (although individual consultation would still be required). However, if the employer had not yet started consultation in respect of Batch 1, it would need to consult collectively about all 40 proposed redundancies (Batch 1 and Batch 2).

Importantly, this does not mean that an employer can deliberately split up proposals to make redundancies within a 90-day period into batches to avoid collective consultation obligations. If employees are able to show that the employer had in fact formed proposals for both of the batches at the same time, but had just delayed announcing the later batch until after consultation had commenced on the first, the employer may be liable for a protective award in respect of the second batch. 

5. Informing and consulting – how much information do you need to give?

There is a specific list of statutory information, set out at s.188(4) TULCRA that must be provided during the period of consultation, which (among other things) includes the reasons for the proposed dismissals. It can be difficult to know exactly how much detail should be provided and employers may be reluctant to provide, for example, confidential financial information which evidences the reasons for the proposals. While it is important that the employee representatives are provided with sufficient information to enable them to understand why the redundancies are needed – and some high-level facts and figures about the business’ financial position might be helpful to ensure this – UK employers are not obliged to provide comprehensive and over-refined levels of information. Employers should consider requiring representatives to enter into confidentiality agreements before they pass on particularly sensitive information.

In terms of what the consultation must cover this is, again, stipulated in the legislation; s.188(2) TULCRA sets out three points to be consulted about which are: (1) avoiding the dismissals; (2) reducing the number of employees to be dismissed and (3) mitigating the consequences of the dismissals. Consultation must be entered into “with a view to reaching agreement”. This does not mean an agreement must be reached, but it does mean that sufficient information is provided, sufficient time is allowed for a response, and responses are given genuine consideration and are responded to.

If this is a topic of interest, look out for our next article in this series, which will deal 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.