The high cost of failure to consult on redundancy
Updated: Feb 17
To protect employees when the redundancy process begins, there are regulations that must be observed. Failure to adhere to these will result in legal action and the possibility of large fines. Find out what you can do to avoid this and conduct the redundancy process responsibly and legally.
An employer has a duty to consult on proposals to make employees redundant before issuing notices of dismissal. Many employers follow the law and involve employees or their representatives in the process of redundancy but what happens if an employer fails to consult at all?
E Ivor Hughes Education Foundation operated several schools including a private girls’ school, which was facing falling pupil numbers. On February 27th 2013, the Governors made a provisional decision that unless pupil numbers increased, they would close the school at the end of the academic year (July). By April, the anticipated pupil numbers had fallen and so a decision was made to close the school. On April 29th, notices of redundancy were issued to all twenty four staff, but crucially, no process of consultation had been undertaken with the unions who represented the staff affected. The school had been unaware that they needed to start the collective consultation process and had taken no legal advice on the matter.
The terminations took effect on 31st July 2013 and the affected members of staff took their case to an Employment Tribunal, claiming that the employer had breached its duty to consult.
The Tribunal agreed with the employees. It awarded the claimants a protective award that represented the maximum 90 days’ pay per employee affected. The employer appealed. It said that the decision on February 27th was provisional and no final conclusion on the fate of the school had been reached. Therefore, there was no duty to consult at that time.
The employer also claimed that if it had to go through a thirty day consultation process before it was able to issue notices of dismissal, it would not be able to dismiss before the start of the next school term. As staff members were entitled to one term’s notice, they would have been paid until 31st December 2013, rather than the end of July.
These arguments were not accepted by the Employment Appeal Tribunal. There was no evidence that the employer had considered them at the time and they were of no relevance now.
The Employment Appeal Tribunal agreed with the findings of the Employment Tribunal, who had found that the duty to begin collective consultation happened in February, when the provisional decision to close was taken, rather than April as the employer contended.
The Employment Appeal Tribunal mentioned two potential tests regarding the duty to consult:
when the employer has proposed, but has not yet made a decision that will foreseeably lead to collective redundancies
when the employer has actually made the decision and then proposed redundancies.
In the opinion of the Employment Appeal Tribunal, based on either test, the duty to consult arose in February 2013. As such, the employer’s appeal was unsuccessful.
The decision underlines the fact that employers need to start the consultation period while redundancies are still just a proposal.
What the law says
Under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (quite a mouthful, which is why it is usually abbreviated to TULRCA), if an employer is making staff redundant and there are twenty or more employees involved, the employer is obliged to consult with the employees about the move.
The process of consultation has to begin at least 45 days before the issue of notices of dismissal if there are 100 or more employees affected, and 30 days beforehand if the number of employees is between 20 and 99.
To prevent employers going through the motions when it comes to consultation, TULRCA says that they must enter into it “with a view to reaching agreement with the appropriate representatives”.
This means that the employer has to consult on how they mean to either avoid dismissals, reduce the quantity of employees who will be dismissed or take action to mitigate the consequences of any dismissals that do happen.
An employer is also under a duty to provide information on the redundancies, including the reasons behind the move.
Representatives must be given written information about:
the reasons for the employer’s proposals;
the numbers and descriptions of employees at risk;
the total number of employees of any such description employed by the employer at the relevant establishment;
the proposed method of selection;
the proposed method of carrying out the dismissals, with regard to any agreed procedure, including the period over which they are to take effect;
the proposed method of calculating the amount of any non-statutory redundancy payments.
Facts about Protective awards
If a tribunal finds against the employer, it will make a protective award, which orders the employer to remunerate each employee for the protected period. This starts on the date of the first dismissal or the date that the award is made, whichever is the earlier. The length of the protected period depends on the viewpoint of the tribunal as to what is just and equitable, considering the circumstances in question. Regardless of circumstances, the maximum period is ninety days.
Tribunals must take the following considerations into account when making an award:
that the award is to punish the employer for failure to consult, not to compensate the employees for loss;
how serious the employer’s failure to consult is – from a point of procedure to a wholesale failure to consult at all;
whether the failure to consult was deliberate and calculated;
if the employer had access to the advice of a lawyer.
The recognised union must lodge a claim for a protective award within three months of the last dismissal taking effect. If there is no union recognition in place, appropriate elected staff representatives must bring the claim. If there are no elected staff representatives, then individual employees must bring their own claims.
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