The Government, through their Employment Rights Bill, plans to change the law regarding collective redundancy consultation duties.
At present, any employer proposing 20 or more redundancies ‘at one establishment’ within a period of 90 days must go through a process of collective redundancy consultation before the redundancies can go ahead.
Consultation with representatives must begin “in good time”, and at least 30 days before the first dismissal where under 100 dismissals are envisaged, or 45 days where 100 or more dismissals are envisaged.
Failure to comply can result in claims for a “protective award” of up to 90 days’ uncapped pay for each affected employee.
The Employment Rights Bill proposes to remove the reference to ‘one establishment’.
The proposed change follows a reorganisation involving Woolworths way back in 2011, during which each branch of Woolworths was treated as a separate establishment, so the duty to inform and consult collectively only applied to individual branches where 20 or more dismissals were envisaged.
The proposed change would remove the often thorny issue of an ‘establishment’, and which has historically been the subject of a multi-factorial test.
The Government has also said that it will review the duration of statutory consultation periods and will consider increasing the current period of 45 to 90 days when an employer is proposing to dismiss 100 or more employees.
The main implications of the proposed changes are that:
- more redundancy exercises will be caught by the obligation to consult collectively;
- there will be a greater risk of non-compliance, particularly where one tranche of redundancies leads to further redundancies being made within the relevant time-frame;
- where the consultation exercise involves two or more sites, the representatives from one site may have little or no interest in the others;
- larger employers may be encouraged to put in place continuous collective consultation processes (anticipating exercises that may arise in the future), which could lead to a reduced quality of consultation;
- employers with multi-employer entities (i.e. different companies employing staff at different locations) will not be impacted by the change;
- specifically, the removal of the reference to ‘one establishment’ means that the question of territorial scope may become less clear, although we expect this issue will be clarified by the new regulations; and
- the proposed increase to the collective consultation period will prolong the period of uncertainty for staff and enhance the costs for employers.