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Employers’ guide: collective consultation in employment law

As an employer, making redundancies is never easy. Here our employment law solicitors explain collective consultation: the legal process you must follow in certain redundancy situations involving several employees.

What is collective consultation?

This is a process of consultation which needs to be followed with affected employees where a redundancy exercise is planned by a business and the employer proposes (before any definite decision is made) to make:

  • 20 or more employees redundant;
  • at one establishment; and
  • within 90 days or less.

The dismissal ‘takes effect’ on the last date of an employee’s employment and a rolling period of 90 days is looked at to see whether an employer's proposal will result in 20 or more dismissals in any 90-day period. In the recent case of UQ v Marclean Technologies SLU it was confirmed that the reference period must be calculated considering any period of 30 or 90 consecutive days during which an individual dismissal took place. This means that employers must look both back and forward from an individual dismissal to determine whether there are 20 or more proposed dismissals within that time to see if collective consultation is required.

This collective redundancy situation is ‘dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related’ - so for example this might be where there is a planned reorganisation but no reduction in overall numbers is anticipated. This is not a process to be used in respect of disciplinary or performance matters: it is solely for redundancies which are not related to the individual directly, but may impact on their current role.

The numbers involved in collective redundancy also include any employees who agree to voluntary redundancy during that same redundancy exercise, but since April 2013 does not include proposed dismissals on the expiry of fixed-term contracts.

There are stricter guidelines on how collective redundancies must be carried out, as opposed to where redundancies of fewer employees are anticipated. Below is a brief guide to collective redundancy consultation. If you require further specifics on the terms relating to this process and whether the duty of collective consultation will be triggered by your business’ proposals, our specialist redundancy solicitors can help.

What is involved in the collective consultation process?

The law states that when proposing to make redundant 20 or more employees at one establishment within 90 days, an employer must do the following:

ActionDetails
Consult with appropriate representatives of the affected employeesAffected employees for this purpose are individuals which are affected by the proposed dismissals or by measures proposed to be taken in connection with the dismissals. The affected employees’ representatives may be any recognised trade union or, if there is not one, other elected employee representatives. If there are not already employee representatives in place, elections may need to be held. Please contact us if you would like further assistance on how to carry out this process correctly, as there are specific statutory rules relating to this type of election, which must be carefully followed.
Start consultation ‘in good time’This means there must be a reasonable period of time set aside for consultation and it must be completed in full before any dismissals take place. Where there are 20-99 employees affected then consultation must begin at least 30 days before the first dismissal takes effect and where 100+ employees are affected the consultation must begin at least 45 days before any dismissals take place.
Consult on avoiding dismissalsThe minimum requirement of consultation must go further than announcing proposals and listening to counter-proposals: it should be undertaken with a view to reaching agreement on ways to avoid or reduce the numbers to be made redundant or reduce the effect of the dismissals.
Provide relevant information to employee representativesAs a minimum the following information must be disclosed in writing to employee representatives at the beginning of the consultation process: 
  • The reasons for the proposed dismissals.

  • The numbers and descriptions of employees outlined in the proposals to dismiss as redundant.

  • The total number of employees of any such description employed by the employer at the establishment in question.

  • The proposed method of selecting employees who may be dismissed.

  • The proposed method of carrying out the dismissals, taking into account any agreed procedure, the period over which the dismissals are likely to take effect.

  • The proposed method of calculating the amount of any redundancy payments to be made (over and above the statutory redundancy payment) to employees who may be dismissed.

  • 'Suitable information' about agency workers (for example the number of agency workers, where they are working and the type of work they are doing).'
  • NotificationAn employer must provide Advance Notification of Redundancies to the Secretary of State for Business, Energy and Industrial Strategy (BEIS) using form HR1, at least 30 or 45 days in advance of the first dismissal taking effect, depending on the number of proposed redundancies.

    There may be ‘special circumstances’ whereby it is not reasonably practicable to provide the information in the time set out by statute and summarised above (although this is limited to exceptional circumstances such as a sudden and unexpected disaster, financial or physical, to a business which means it is unable to comply). In this case, the employer may not be able to comply fully with the duty, but must still take such steps towards compliance as are reasonably practicable.

    If an employer has obligations to collectively consult under an information and consultation agreement, the employer must abide by the terms of that agreement. If you require more information in respect of information and consultation agreements, please contact us.

    Does collective consultation remove the need for individual consultation with affected employees?

    Collective consultation is not a substitute for individual consultation with affected employees. If employers are to have the best chance of carrying out a fair redundancy process and be less at risk of unfair dismissal claims, they should discuss the reasons for proposed redundancies, the selection criteria to be applied and its application to individual employees, as well as the existence of any suitable alternative employment with affected employees, individually. Consultation with a trade union or employee representative does not remove the obligation on an employer to consult individually in respect of those matters. An agreed procedure which includes individual meetings is advisable, whether these are scheduled at the end of the collective redundancy procedure or concurrently with it. If you would like assistance with drafting or updating your redundancy documents, please get in touch with our employer solicitors.

    What does meaningful consultation mean?

    It is important that an employer does not present a proposal as a fait accompli, but simply as a proposal and consult with the intention of changing course if there is a viable business case presented for doing so. Part of this might include:

    • Looking at alternatives to redundancy – such as job sharing, part time working or trial periods of amalgamating roles.
    • Setting aside plenty of time for consultation so as not to unnecessarily drag out the consultation period, but to have meaningful discussions, which will involve a two-way dialogue, listening not only to concerns of employees and their representatives, but also any suggestions for avoiding redundancies or improving the process.
    • Providing as much information as possible to employees so that they are fully able to participate and discuss any changes and any alternative options in respect of the collective redundancies.
    • Use fair, non-discriminatory and objective selection criteria. Employers should clearly explain the criteria and where possible meet with the employees at risk of redundancy individually to discuss their scores and challenge any scores they do not agree with.
    • Any redundancy payments should be set out clearly, where they are applicable.

    Practically speaking, meaningful consultation means being fully prepared with consultation policies and procedure and personnel who are fully aware of these and know how to correctly implement them. Areas such as redeployment opportunities, selection processes and outplacement should already have been discussed by senior management before commencing consultation with affected employees. If you require assistance with the drafting of redundancy policies or procedures or have questions about how to implement part of your business’ procedure fairly, our specialist employment solicitors can help.

    Changes to terms and conditions

    As described above, redundancy for the purposes of collective consultation has a much wider meaning than redundancy for the purposes of statutory redundancy payments or unfair dismissal, where redundancy is defined as a reduction of jobs, workplace(s) or people performing specific skills. This wider definition means that as well as voluntary redundancies, as discussed above, other circumstances can fall under the umbrella of collective consultation such as where an employer changes an employees' terms and conditions of employment through termination and re-engagement. Since in this case there is a dismissal by reason of redundancy and the reason for dismissal is not connected with the individual employee, even if the job functions or place of work of the employees have not changed so under the usual definition of redundancy this would not qualify as redundancy, if the requirements for collective consultation were met, employees re-engaged on new terms and conditions could be subject to collective consultation.

    Further, if there is good cause for constructive unfair dismissal and an employee is not dismissed but resigns in respect of a change to terms and conditions which are significant and disadvantageous, those employees could also fall within the definition of an affected employee and collective consultation.

    Watch our video to find out more about changing employees’ terms and conditions:

    What are the implications for a dismissal of getting the collective redundancy consultation process wrong?

    Collective consultation can affect fairness of dismissal. Although each case must be judged on its own facts, the Employment Appeal Tribunal has said that an Employment Tribunal will take into account the following when determining whether a particular redundancy dismissal was fair:

    • The employer attempts to give as much warning as possible of redundancies so that the trade union and employees who may be affected can make themselves aware of the facts, alternatives to redundancy or find alternative employment at an early stage.
    • The employers consults with trade unions (where applicable) as to how the planned management result can be achieved fairly and minimising hardship to the employees. The employer will seek to agree the selection criteria to be applied to the affected employees with the trade union. Further, when a selection has been made, the employer will consider together with the union whether the selection has been made in accordance with the agreed criteria.

    Therefore, if collective consultation is held fairly this will assist in a finding that any subsequent dismissals are fair, particularly if a trade union acknowledged, after consultation, that there were no alternatives to redundancy, agreed with the proposed selection pool and approved the selection criteria and the application of those agreed criteria. This can be challenging though, as trade unions will generally attempt to resist approving redundancies and may even refuse to enter into discussions about selection criteria or the proposed selection process. Any attempt by an employer to consult with the trade union on these points will help support an employer’s assertion that a future dismissal on the grounds of redundancy is fair.

    Not carrying out consultation correctly can impact a business in a number of ways:

    • Industrial relations. Whilst defending unfair dismissal claims may be more difficult if no consultation has taken place with a trade union, failure to consult a union will not always make redundancy dismissals unfair. However, particularly if there is a recognised trade union, there is often pressure from the union to consult, and a failure to do this will lead to loss of goodwill and poor industrial relations. Even where there is no legal duty to consult employers may consider consulting to avoid such a negative impact on the business.
    • Unfair dismissal. A trade union, employee representative or if there are none the affected employee may bring a claim either before the last of the dismissals takes effect or within three months after the last of them. In exceptional circumstances the tribunal can allow a longer period for a complaint to be lodged. The risk of unfair dismissal claims and likely amounts of compensation awarded has to be weighed up against paying to employ staff during the collective and individual consultation periods. If an Employment Tribunal finds that collective consultation has not been carried out as it should have been it is obliged to make a declaration to that effect and might also make a protective award. The protective award is where an employer must pay employees made redundant where collective consultation has not been carried out fairly, for a ‘protected period’. The point of the protective award is to punish an employer for the extent of its failings in consultation and the tribunal has the discretion in fixing the length of the protected period, depending upon what is just and equitable and taking account of the seriousness of the employer’s failings in the consultation process. The protective award is not to compensate the employee for their individual financial loss and so payment of wages during the protected period will not reduce that employee's protective award.

    The maximum protective award is up to 90 days' actual gross pay (without a statutory cap) for each dismissed employee. In the case of 20-99 redundancies to follow the collective consultation timescales correctly the employees would have had to have been employed for at least 30 of these 90 days meaning the employer's real risk from a total failure to consult is 60 days' gross pay for each employee. Where there are 100+ employees to be made redundant, an employer would have employed the employees for 45 days, as that is the period that must elapse between the start of consultation and the dismissals taking effect. The employer's real risk from a total failure to consult in this case is 45 days' gross pay for each employee.

    Collective redundancies and Transfer of Undertakings (Protection of Employment) Regulations (TUPE)

    The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) protects employees’ terms and conditions of employment when a business is transferred from one owner to another so that when they move to a new employer, employees’ terms are the same as they were for their old employer. Both the outgoing and incoming employers have duties to inform and (in some cases) to consult any employees affected directly or indirectly by the transfer. There is no specific timeframe dependent upon the number of employees, unlike in the case of collective consultation. But if either the incoming or outgoing employer proposes to make redundancies during or after a transfer redundancy consultation for proposed post-transfer redundancies can begin before the transfer and continue after the transfer, as long as employers do not select those to be made redundant before the transfer actually happens.

    Our employer solicitors work across all areas of employment law for business, so we also provide expert legal advice on TUPE, either separately or in conjunction with your redundancy situation.

    Collective redundancies and insolvency

    Collective redundancies are often the consequence of severe financial difficulties. However, because insolvency is quite common and most businesses have reasonable warning of severe financial difficulties, this does not qualify as ‘special circumstances’ meaning that employers will need to consult and should start planning for consultation as soon as redundancies look likely. If directors or managers fail to collectively consult before the business goes into administration, the insolvency practitioners will be responsible for this.

    Redundancy policies including a collective redundancy policy are advisable and our specialist employment solicitors can assist in drafting this for you as well as guiding you through the process practically, if and when required.


    What next?

    If your business needs to make collective redundancies and needs legal advice on collective consultation processes and documentation, our specialist employer redundancy solicitors can help. Call us on 0800 689 1700, email us at enquiries@hjsolicitors.co.uk or fill out the form below with your enquiry.

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