With the easing of restrictions and the furlough scheme coming to an end over a month ago, what does this now mean generally for businesses?
Businesses in the UK will have a number of options when things go back to the “new normal”. This will largely depend on the nature of their business, how the remaining restrictions impact it and how much their sector can operate and recover. The more restrictions, downturn and economic uncertainty, the worse the outcome is likely to be:
- Staff may also return to work but on changed terms, either on a temporary or permanent basis to avoid redundancy. This could include, a reduced working week and salary, unpaid leave, asking for volunteers for sabbaticals or reducing salaries. Many businesses are already considering and implementing these measures in the short term until the economy picks up.
- However unfortunately some will also be looking at redundancies, in some cases on a large scale.
When dismissing employees by reason of redundancy, a fair process must be followed to avoid unfair dismissal claims. This involves discussions and consultation at a formative stage, steps to try and mitigate the need for redundancy and proper scoring of potentially redundant employees.
In addition, if there is the potential that 20 or more staff could be made redundant in the same establishment, a much more prescriptive collective consultation process must be followed.
How does the number of employees affect the redundancy process?
When a business is proposes making redundancies, they must identify the number of employees who may potentially be affected. The more employees an employer is proposing to dismiss, the more obligations arise to ensure there is a fair redundancy process.
An employer who is proposing to dismiss 20 or more employees within a 90-day period or less at one establishment must adhere to statutory collective consultation rules.
As set out in Trade Union and Labour Relations (Consolidation) Act 1992, consultation must be done “in good time” before any dismissal and at least:
- 45 days before the first of the dismissals is due to take effect where the employer is proposing to dismiss 100 or more employees; and
- 30 days before the first dismissal takes effect where the employer proposes to dismiss at least 20 but less than 100 employees.
It is also worthwhile noting that the definition of “proposing to dismiss” is quite wide and does include potential dismissal and re-engagement scenarios which, for example, may come into play when an employer is changing contractual terms and conditions.
What should a collective consultation process look like?
Below is an overview of the process as a guide only, and may not be appropriate for all circumstances so with any collective consultation process, legal advice should be sought.
The first step is to identify the roles which are at risk of redundancy.
An individual redundancy process involves consultation with the individual employees whose roles are at risk of redundancy. Where the collective consultation process applies, due to the higher number of employees at risk, there is also an initial process to identify the appropriate representatives for collective consultation, which is set out in legislation and must be followed.
At a high level those initial steps of the collective consultation process are as follows:
- Does a trade union have collective bargaining arrangements for the affected staff? If so, consultation will be with trade union representative(s). If there are none, is there an employee representative body with a remit to consult about redundancies? Otherwise, an election process under statutory rules will need to be followed to appoint the appropriate consultation representatives.
- Elect employee representatives if appropriate. At this stage, an employer should identify all employees who might be made redundant (as a group), explain the reasons for the potential redundancies and explain the need to elect employee representatives for collective consultation. There is a statutory process for this which should be followed.
- Notify the Secretary of State if collective redundancy applies. The employer must do so at least 30 days before the first dismissal takes effect where the employer proposes to dismiss 20 to 99 employees within a 90-day period; or at least 45 days before the first dismissal takes effect where the employer proposes to dismiss 100 or more employees within a 90-day period.
- Employers should then provide the representatives with specific written information to comply with Section 188 of Trade Union and Labour Relations Consolidation Act 1992.
- For the above, the employer should consider the appropriate pool(s) for redundancy and proposed selection criteria and list any alternative vacancies.
- At this stage, they should consider whether there are any employees who are pregnant, or on maternity, adoption or shared parental leave as special rules may apply to them.
- Have the first collective consultation meeting to explain, amongst other things, the proposals, the reasons for them and to consult about ways of avoiding the redundancies are being explored. Employers should listen to and take a note of any counter proposals by the representatives. Although a number of steps have already been taken, it is only at this point that collective consultation has begun. It is essential that the appropriate timeline of 30 or 45 days before the first dismissal takes effect is calculated from this date and not earlier.
- Suggestions should be considered and responded to through the consultation.
- A second collective consultation meeting should take place with further meetings as required with the representatives. Consultation should be with a view to reaching agreement on the process, how to avoid redundancies, the proposed selection criteria, suitable alternative employment and how any dismissals will be affected. Once these matters are finalised, there will be individual consultation.
How does an employer follow a fair process?
The next steps follow in an individual redundancy process:
- Employers should proceed to undertake a ‘scoring’ exercise, scoring each potential redundancy employee using an objective selection criteria and scoring guidelines.
- Employers should then write to those employees that have been provisionally selected for redundancy, with a follow-up meeting to discuss their provisional selection. The employees should also be advised of their right to bring a companion.
- With all meetings, ensure a detailed note is taken. Any views on the scoring should be considered.
- The employees identified after scoring should then be invited to a further meeting to discuss that their selection is confirmed, and to go through the redundancy package. The employee should also be reminded of their right to time off to seek alternative employment.
- The employer must write to the employee confirming the decision to dismiss them, giving notice of redundancy and to explain the termination date (termination may be with immediate effect if the employer is entitled to pay the employee in lieu of notice). Employers should confirm that the employee has the right of appeal, explain how to appeal and the relevant time limit. You may want to consider notice and garden leave.
- If the employee appeals, the appeal should be considered by someone senior to the person who made the initial decision on redundancy. Following the appeal, the employer should write to the employee confirming the outcome of the appeal and that this is a final decision.
There is a lot to consider in respect of the redundancy process. As part of this process though, are there any particular issues relating to COVID-19 that employers should be thinking about?
Yes, there are. Traditional employment processes, including redundancy processes, may need to be adapted in response to the challenges created by the virus. For employers some of the unique virus related challenges are likely to be:-
- Traditional face – to – face meetings, which are a key element of standard procedures, may not be possible and alternatives may need to be considered.
- Managers, employees, representatives may have periods where they are unable to engage in processes due to illness from the virus or the need to look after relatives or others.
- Also be aware of absent employees. Those who are off on maternity leave or long-term sick should not be forgotten as part of any redundancy process.
Although time may be of the essence, planning (albeit quickly) is still vital.
What are the risks of failing to get the collective redundancy process right?
There are many reasons businesses should be alert to getting the collective consultation process right.
Firstly, an employee or trade union representative can raise a complaint to the Employment Tribunal if the employer fails in their collective consultation obligations. If the claim is successful, the tribunal can make a protective award against the employer. The maximum protective award is 90 days' actual pay per employee affected. Depending on how many employees are being made redundant, this could amount to a significant amount.
Employees can also raise claims for unfair dismissal if they believe the redundancy was unfair, subject to having qualifying service. The maximum level of compensation a tribunal can award is £89,493.
If a selection criteria is also skewed unfairly towards those with a protected characteristic there also could be risks of a discrimination claim. Compensation for successful discrimination claims are uncapped, so can be very costly.
In short, this is an expensive mistake for any business to make.