Part 2: Collective redundancies

With inflation driving up wages and running costs and the cost-of-living crisis impacting demands for products and services, many businesses have been facing the difficult choice of considering large scale redundancies.

Employers, HR and company directors have much to contemplate when analysing the need for mass redundancies. In this blog, the second of a two-part series, Arbor Law’s Fiona Morgan looks at what they must consider regarding collective redundancies.

What is a collective redundancy?

In basic terms, a collective or mass redundancy is when an employer is proposing to dismiss as redundant 20 or more employees at “one establishment” within 90 days.

Where businesses are proposing redundancies of 20 or more people, it is essential to consider whether the collective redundancy consultation obligations under the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULR(C)A”) apply.  The consequences of failing to comply with “TULR(C)A” can be severe, including criminal penalties in certain circumstances.

When must I carry out a collective redundancy consultation process under TULR(C)A?

If your business is “proposing to dismiss as redundant”:

  • 20 or more employees
  • at any “one establishment”
  • within any period of 90 days or less,

this gives rise to statutory obligations to carry out a collective consultation process in accordance with section 188(1) TULR(C)A.

Separate employing entities will count as separate employers for this purpose. So, if one company in your group is proposing 15 redundancies, and another company in your group is proposing 19 redundancies, the duty to collectively consult will not apply.

What is meant by “proposing to dismiss as redundant”?

“Proposing to dismiss as redundant”, in most cases, means that there must be “more than a mere possibility” that redundancy dismissals might occur, but no decisions have yet been made to make the dismissals. Collective consultation must take place before any employee is told that they are being made redundant.

Where a business is proposing to shut down completely or is proposing to close an entire site which will almost inevitably lead to dismissals, dismissals are “proposed” at the point when the closure is proposed. The duty to collectively consult in these circumstances will be triggered when the business or site closure is initially proposed.

What is meant by “one establishment”?

Unhelpfully, “establishment” is not defined in the legislation.  Caselaw suggests that an “establishment” means the unit or entity to which the relevant employees are assigned to carry out their duties, which has a degree of permanence and stability and its own organisational structure (but need not have separate management).

An “establishment” could mean a particular geographical location such as a branch office, site or depot. It could alternatively mean an organisational unit that may span different geographical locations (such as separate production units or administrative units such as an IT department).

It is recommended that you seek legal advice when identifying whether your proposed redundancies will take place at one or multiple establishments, and thus whether the duty to collectively consult applies. When in doubt, it is safest to proceed on the assumption that the collective consultation obligations will apply.

When must the collective consultation start?

The consultation must begin “in good time” to enable meaningful consultation to take place for the purpose of attempting to achieve an agreed solution.  While it is not necessary to reach agreement, the consultation process must be more than a mere exchange of competing views. An unwillingness on the part of the employer to seek agreement (for example, by suggesting that certain decisions are already a fait accompli) can lead to a breach of the requirements and the making of a protective award by a tribunal.

Notwithstanding the above, there are bare minimum periods that must elapse between the start of consultation and the date of the first dismissal, depending on the numbers of dismissals proposed:

  • Where the employer is proposing to dismiss 100 or more employees within a 90-day period, consultation must begin at least 90 days before the first dismissal takes effect.
  • Where the employer is proposing to dismiss between 20 and 99 employees in a 90-day period, consultation must begin at least 30 days before the first dismissal takes effect.
What are the collective consultation obligations?

The obligations are, in summary, to:

  • Notify the Secretary of State of the proposed redundancies.
  • Provide statutory information to appropriate staff representatives.
  • Carry out a consultation with the appropriate representatives.
What do I need to do to notify the Secretary of State?

You must notify BEIS of the proposed redundancies using form HR1.

Failure to submit this form within the required timescales is a criminal offence.

At a bare minimum, you must notify the Secretary of State before any notices of redundancy are issued and, in any case, at least 30 days before the first dismissal takes effect (for 20 or more dismissals), or at least 45 days before the first dismissal takes effect (for 100 or more dismissals). However, it is best to submit form HR1 as the first thing you do – so as soon as you believe that you may be under a duty to collectively consult.

What if there are no staff representatives?

If there is no standing body of elected representatives (such as a recognised trade union or Works Council) for the affected employees, you must invite candidates to stand and hold elections for employee representatives before commencing the collective consultation process.

What do I need to do to arrange employee elections?

First, you must identify suitable “constituencies” from which representatives are to be elected. There is no set rule for this and will be dependent on the number of proposed redundancies and the parts of the business from which they will be drawn. For large numbers of redundancies across different parts of a business, it is usually appropriate to have multiple representatives representing different categories of staff.

The affected employees must be given the opportunity to nominate candidates for election, whether it be themselves or another affected employee.

If only one candidate is nominated, then they can be appointed without an election.

A ballot must be arranged if there is more than one candidate for any representative role. The ballot must be secret, and arrangements must be made to ensure that the counting of votes is accurate. It is permissible for elections to be conducted online or on paper, so long as the ballot is secret and secure. The employer should not attempt to influence the election result at all.

If no candidates are nominated, then the collective consultation can take place with the affected employees directly.

What information must be provided to the staff representatives?

The following information must be provided as a minimum (section 188(4) TULRCA):

  • The reasons for the proposed dismissals.
  • The numbers and descriptions of employees whom it is proposed be made redundant.
  • The total number of employees of any such description employed by you at the establishment in question.
  • The proposed method of selecting employees who may be dismissed, including:
    • the criteria by which you propose to determine the pools of employees at risk;
    • the selection criteria you propose to use to choose employees for redundancy from those pools; and
    • how many employees from each pool you envisage making redundant.

See Part 1 of this series for a discussion of selection pools and criteria.

  • The proposed method of carrying out the dismissals, with due regard to any agreed procedure, including the period over which the dismissals are to take effect.
  • The proposed method of calculating the amount of any redundancy payments to be made (over and above the statutory redundancy payment) to employees who may be dismissed.

This information must be in writing and may be either delivered to the appropriate representatives individually or sent by post to an address notified by them to the employer. NB – there is no provision for this information to be provided via electronic means, so technically providing the information by email would be a breach of TULR(C)A.

Simply giving the required information to all affected employees will not suffice unless they were given the opportunity to elect a representative but failed to do so.

What consultation must be carried out with the staff representatives?

At least one consultation meeting should be arranged with the staff representatives, although usually more than one meeting is required.

Consultation should take place when the proposals are still at a formative stage (i.e. not as a fait accompli where the decision to make redundancies had already been taken) and you should enter the consultation with an open mind and a willingness to be persuaded.  The representatives should be given the fair time and opportunity to understand matters and express their own views and make their own counterproposals.

The following issues should be discussed and negotiated with a view to reaching an agreement:

  • The business reasons for the proposed redundancies.
  • How the redundancies could be avoided (including, if a business or site closure is proposed, how the business or site could be kept open).
  • The proposed selection pools and selection criteria.
  • Whether the number of dismissals can be reduced.
  • Whether there are any suitable alternative vacancies (see Part 1 of this series for a discussion of suitable alternative employment)
  • Mitigating the consequences of dismissals.
Do I still need to consult with employees individually?

Yes! The collective consultation obligations outlined above are in addition to your business’s obligation to carry out an individual consultation process with the affected employees.

The collective consultation process should be carried out first.

Once the collective consultation has been completed, then you must proceed to consult with each individual employee who is at risk of redundancy about the proposals, as outlined in Part 1 of this series.

What happens if my business breaches the collective consultation provisions?

Failure to notify the Secretary of State about the proposed redundancies is a criminal offence.

Employees will have the right to claim a “protective award”, although the employee representatives must bring the claim on behalf of their employees. Each employee covered by the protective award is entitled to a “week’s pay” for each week of the protected period and a proportional sum for each part week, up to a maximum of 90 days’ pay. The award is calculated with reference to the actual gross weekly pay per employee.

In addition, individual employees may also bring claims for unfair dismissal.

Further help

As can be seen, the statutory collective consultation process can be very complex, and the consequences of failure to comply can be very severe. It is recommended that you take legal advice at an early stage to ensure that your business does not inadvertently fail to comply with its duties.  For advice and support on implementing collective redundancies in your business, you can contact me to discuss how we can assist further.

About Fiona Morgan

Fiona is a senior employment lawyer with more than 18 years’ experience in advising a diverse range of corporate clients on employment law issues. Before joining Arbor Law, she was a partner and co-head of the Employment law department at Kennedys, working with a wide range of clients from multinational insurers and transport businesses to SMEs and start- ups. She advises clients on an array of employment matters, from day-to-day employment law queries to strategic guidance on long-term projects and corporate transactions.