Insights

Collective Redundancies - A Practical Guide

15/05/2020

The announcement by the Chancellor on the 17 April 2020 that the Coronavirus Job Retention Scheme ('CJRS') has been extended to June was extremely welcome to both employers and employees.  However, it now appears likely that the CJRS will start to be wound down from July.   

Tough decisions regarding business operations need to be made as the winding down of the CJRS  approaches.  The timing issue is particularly acute for businesses which may need to consult collectively over redundancies or changes to contract terms as there are minimum timescales for such consultation.   

When do collective consultation obligations apply?

If an employer is proposing to dismiss 20 employees or more at one establishment within a period of 90 days or less, the collective consultation obligations will apply.  Specifically, the employer must:

  • Provide specified written information to and hold consultations on its redundancy proposals with appropriate representatives of the affected employees ('collective consultation'); and
  • Notify the Department for Business, Energy & Industrial Strategy (BEIS) of its proposals.

Redundancy is defined widely in this context to include any dismissal for a reason which is related to the business rather than the individual (e.g. their conduct, performances or incapacity). This includes where a contract for employment is terminated and the employee rehired on different contractual terms (but excludes expiry of fixed term contracts on the anticipated date).

A key issue for employers is what counts as an 'establishment' (and so which dismissals need to be counted).   An 'establishment' will often correspond with a physical location (e.g. a particular branch) but this is not always the case and can be more complex for remote-working staff (e.g. mobile sales teams).  

If the employer is proposing to make redundancies of 19 employees or fewer within any 90 day period, the employer must consult individually with affected employees but collective consultation will not apply.

When to begin collective consultation

If the employer is proposing to make redundancies of 20 to 99 employees, they must begin the consultation process at least 30 days before the first dismissal takes effect. If the number of dismissals is 100 or more, the minimum period is 45 days.   However, consultation must also begin 'in good time' - which means it must begin before the employer has taken any operational decisions which make consultation meaningless. 

In some cases, notice of dismissal can be given before the 30/45 days has expired (as long as the employees' employment doesn't terminate until after the relevant period), but only where effective consultation has already concluded.

Notifying BEIS 

Employers must notify BEIS of a collective redundancy proposal by completing Form HR1 in relation to each 'establishment' at which 20+ dismissals are proposed and submitting it by post. This should be done at the outset of the consultation process and a copy provided to the employee representatives.  

Affected employees and appropriate representation

The affected employees are not only those who are to be made redundant. It can include employees whose may be affected by other measures taken in connection with the redundancy proposals.

Employers must consult with 'appropriate representatives' of the affected employees. They can be:

  • Representatives of a trade union if recognised by the employee; or
  • Representatives elected by the affected employees; or
  • An existing standing body of representatives elected by the employees.

If the employer recognises a trade union, then employers must consult with representatives of that trade union.  

The consultation process

The employer must provide the representatives with written information about the proposed redundancies at the outset of consultation. This must include information about: the reasons for proposed dismissals, numbers and descriptions of proposed employees to be made redundant and the proposed method of selecting employees who may be dismissed.

The employer must also send a copy of the Form HR1 to the representatives.

The employer must then consult with the representatives with a view to reaching agreement on ways to avoid the dismissals, reduce the number of employees to be dismissed and mitigating the consequences of the dismissals.  Typically there will be several meetings with the representatives to discuss these issues.

Although employers must consult with a view to reaching an agreement, there is no requirement to agree to any counter-proposals made by the employee representatives. However, it is not enough for employers to simply consult as to how best to handle the dismissals proposed; the employer should consult on ways of avoiding the dismissals.  This should include consultation about the business decisions which have resulted in the proposal to make redundancies.

Running the consultation process during lockdown

The current lockdown and social distancing rules will undoubtedly pose practical problems in arranging for employee representatives to be elected and employers to consult with those representatives.  

Employers should give thought as to how communication and the ballot is going to take place.

This may be done using video conferencing technology such as Zoom, Microsoft Teams or Skype. Employers should be aware of the privacy issues surrounding these platforms. Times for video calls need to be agreed in advance around the home working circumstances of those involved.

However, virtual communication may not be suitable for many sectors that employ staff who do not speak English as a first language or do not have suitable internet access at home. The employer has an obligation to do more than just hear the views of the employee representatives; there needs to be genuine consultation. Employers should be prepared to make arrangements to ensure that potentially disadvantaged employees can participate effectively, even if this involves additional costs.  

The election process needs to be fair and confidential – technological solutions may be appropriate providing that they are sufficiently secure and can be accessed by all affected staff. A priority for employer should be the safeguarding of personal and confidential data. If the employer is conducting some or all of the consultation process in a workplace that has been reopened, then the employer will need to comply with social distancing rules and infection control guidance. The guidance may differ by sector, so the employer needs to adhere to the rules that pertain to its particular type of business. The Government has published specific guidance to safe working for eight different types of work places. This can be found following the link below.

https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19

Furloughed employee representatives 

The updated CJRS guidance confirms that furloughed employee representatives will not be regarded as 'working' for the employer during consultation and thus breaching the conditions of furlough, whether they are an elected employee representative or trade union representative.  However, employers should be careful to avoid placing obligations on these representatives which go beyond their statutory role.

"Special circumstances" exception

There is a limited exception to these obligations where there are special circumstances which render it not reasonably practicable to comply with some, but not all, of the consultation requirements. In this circumstance, an employer is still required to take all steps towards compliance as are reasonably practicable.

'Special circumstances' are not legally defined, but are interpreted narrowly: for example, insolvency is not of itself a special circumstance.  The CJRS and government backed guaranteed loans for business may make it difficult for employers to rely on the special circumstance exception in the event of no or shortened collective consultation. Employers should not assume that they can rely on this defence and to minimise risk should (as far as possible) comply with the consultation obligations.   

Penalties for non-compliance

Employee representatives (or employees, if no representatives were elected) can bring Employment Tribunal claims for breach of these obligations.  In cases of breach the Tribunal can make an order that the employer pay to the employees a protective award of up to 90 days' pay per affected employee.

Failure to submit the form HR1 to the Secretary of State is a criminal offence and can result in an unlimited fine upon summary conviction. It is essential that an employer files the HR1 at the outset of the collective consultation process.

Employers should also note that the CRJS is not to be used for any statutory redundancy payments (or payments in lieu of notice); seeking to do so could result in clawback of payments and further penalties being imposed by HMRC.

 Michael Burman and Alexandra Mizzi 

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Tough decisions regarding business operations need to be made as the winding down of the Coronavirus Job Retention Scheme approaches.

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