Collective redundancy and the 'special circumstances' defence
Given the current economic crisis, we thought it would be helpful to issue a reminder on the key points arising under collective redundancy rules.
Consultation trigger:
Where a company proposes to dismiss as redundant over a 90-day period 20 or more employees at one establishment, it must collectively consult employee representatives on its proposal and notify the Business department by filing an HR1 form. Failure to file the HR1 form is a criminal offence and the employer will be liable on summary conviction to an unlimited fine.
Note that the trigger for collective consultation is a proposal affecting 20 or more employees at “one establishment”.
Each separate company in a group will be an individual establishment.
Further, if one company has employees working across multiple sites, it may have more than one establishment. In other words, it may be able to treat each site as a distinct establishment, and bring the number of redundancies down below 20 at each of these sites to avoid the collective consultation requirements.
The legal definition of establishment in this context is fact-sensitive, but in general means a distinct geographical site, with some degree of operational or management independence at each site.
Consultation period:
The minimum consultation period depends on the numbers of employees affected, and is:
30 days (for 20-99 employees); or
45 days (for 100+ employees)
The consultation period starts once the employee representatives have been provided with certain required information about the proposed redundancies (e.g. the timing, the reasons for them, any selection criteria, redundancy terms etc).
The obligation to collectively consult operates, in effect, as a moratorium on the proposed dismissals, whereby the dismissals cannot take effect for a minimum period of time once consultation has started. However, it is possible to give notice to employees within the 30-day consultation period (say after 3 weeks of consultation), so long as that notice period expires outside this window (e.g. on the 31st day).
Claims / liabilities:
The maximum sanction for breaching the obligations is a "protective award" of up to 90 days' gross actual pay for each affected employee.
Note that the claim for a protective award can be brought by staff with less than 2 years’ service.
If employees have more than 2 years’ service, they will have the additional right not to be unfairly dismissed. This means that after collective consultation, you would need to consult with them individually before making their role redundancy.
Employees dismissed for redundancy are entitled to:
Notice pay and benefits under their employment contract
Accrued holiday up to the termination date
If they have more than 2 years’ service, a statutory redundancy payment, calculated in accordance with the statutory formula – here.
“Special circumstances” defence:
There is an exception to the collective redundancy rules. This rule provides that where special circumstances render it not reasonably practicable to consult in good time or provide the statutory information to employee representatives, the employer need not fully comply with the duty, but must still take such steps towards compliance as are reasonably practicable.
There is no legal definition of what amounts to special circumstances, and cases in this area are judged on their facts. The Courts have interpreted this narrowly however, to avoid employer’s misusing the definition to avoid their obligations.
The employer has the burden of proof to show there are special circumstances, and that it took such steps it reasonably could to comply with its obligations.
Whilst a global pandemic is clearly creating an urgent cash flow issue for many businesses, if the business does have more time to respond to the crisis, then it may not be able to rely on the special circumstances defence. The Coronavirus Job Retention Scheme might also now give employers more time to follow the collective redundancy rules.
It remains important that if a truncated collective consultation process is followed due to urgent business needs, that the reasons for this are well-documented.
Please get in touch if you would like to discuss any of the above issues further.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.