August 2015: Maximum Protective Award Ordered: The EAT has provided a stark warning to businesses that are planning to make large scale redundancies. It has decided to make a 90-day protective award in circumstances where no consultation was undertaken because the employer was unaware of its legal obligation to consult.

The EAT also held that there were no special circumstances rendering it not reasonably practicable to comply with the consultation requirements. Although the decision appears harsh, the EAT took a dim view of the failure to take appropriate legal advice, describing that failure as “reckless”.

May 2015: Employers will welcome an ECJ decision confirming that “establishment” means a local employment unit for collective redundancy purposes. It is not essential that the unit in question has its own management that can independently effect collective redundancies.

For the past two years, businesses have faced practical difficulties in knowing when the threshold of 20 employees was reached where redundancy dismissals were being implemented in different locations. This business briefing summarises the collective redundancy consultation process.

When does the duty to consult collectively arise?

  • The duty to consult arises where a business is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. An establishment means a local employment unit for collective redundancy purposes
  • The obligation to consult operates, in effect, as a moratorium on the proposed dismissals, whereby the dismissals cannot take effect for a minimum period of time once consultation has started.
    Whom to inform and consult
  • The business has a duty to inform and consult on its proposal with appropriate representatives of the affected employees. It must also notify the Department for Business, Innovation and Skills. Failure to do so is a criminal offence
  • Where any of the affected employees is a member of a recognised trade union, the trade union must be consulted. In other cases, the business may consult with representatives directly elected by the affected employees or with an appropriate standing body of representatives elected or appointed for some other purpose
  • Where elected representatives are required, specific statutory rules exist governing the election and adequacy of representation produced by that election

The consultation process

  • The consultation must begin in good time. Certain minimum time periods apply depending on the scale of the redundancies proposed. For fewer than 100 redundancies the consultation period is 30 days. For more than 100 it is 45 days
  • Consultation begins with the provision of information on the proposals to representatives
  • As a minimum, consultation must be undertaken with a view to reaching agreement on:
    • ways and means of avoiding the dismissals
    • reducing the numbers of dismissals, and
    • mitigating the consequences of any dismissals

Penalties for breaching the duty to consult

  • A failure to comply with any of the rules on information or consultation, or on the election of representatives, can lead to a protective award being made by an employment tribunal
  • The maximum protective award is up to 90 days’ gross pay for each affected employee. The award is not based on loss of earnings, but on the seriousness of the employer’s default

The content of this business briefing is for general information only and does not constitute legal advice. It states the law as at August 2015. We recommend that specific professional advice is obtained on any particular matter. We do not accept responsibility for any loss arising as a result of the use of the information contained in this business briefing.