The CJRS (furlough) scheme has been extended until t2 December 2020, at which point it will be replaced with the Job Support Scheme. But with lockdown restrictions being imposed from 5 November 2020 until 2 December 2020 (and the fear that this will be extended), many businesses will be forced to consider making redundancies or changing contract terms to survive a difficult winter.
Businesses which may need to consult collectively over redundancies or changes to contract terms need to consider their position swiftly as there are minimum timescales for such consultation. What does that consultation involve?
When do collective consultation obligations apply and what do they involve?
If an employer is proposing to dismiss as redundant 20 employees or more at one establishment within a period of 90 days or less, they will need to consult collectively about those proposals. This requires the employer to provide written information to and consult with appropriate representatives of the affected employees and notify the Department for Business, Energy & Industrial Strategy of its proposals by submitting form HR1. Failure to submit the form HR1 is a criminal offence punishable by an unlimited fine, so it's vital to get this right.
Which dismissals need to be counted?
"Redundancy" for these purposes includes terminations with a view to re-engaging on new 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 not in every case - this is fact-sensitive.
Timing of 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 proposed 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.
Running the consultation process remotely
Employers should consider the mechanics of the election and how consultation will work: how will the employer consult with the representatives and how will they discuss the proposals with the affected employees? Although online methods such as Zoom and Teams have become popular during the lockdown, they may not be suitable for workforces with a high percentage of non-English speakers or staff who do not have internet access at home. 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 accessible.
Furloughed employee representatives
The CJRS guidance confirms that furloughed employee representatives will not breach the furlough scheme conditions if they act as an elected employee representative or trade union representative in collective redundancy consultation. However, employers should be careful to avoid placing obligations on these representatives which go beyond their statutory role. The HR or management staff who attend the consultation meetings on behalf of the business would, however, probably be regarded as working, so this role should not be undertaken by furloughed staff.
Furlough scheme and termination costs
The furlough scheme guidance makes it clear that the scheme 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, including penalties for individual directors.
"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 in itself a special circumstance. The CJRS and government-backed guaranteed loans may also make it difficult for employers to rely on this exception. Employers should therefore 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 if the employer has not complied with 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. It is therefore in employers' interests to comply as far as possible – specialist advice about the legal and practical issues may help businesses avoid costly mistakes.
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