Redundancies – what businesses need to be aware of

Making redundancies will, unfortunately, be the harsh reality for many employers due to the impact of Covid-19. For those employers who, over the coming weeks and months, find themselves in the difficult position of having to making compulsory redundancies, it is crucial that they follow a fair process.

Key steps towards fair dismissals

An employee who has two years continuous service with an employer will be able to bring a claim for unfair dismissal at the employment tribunal if they believe that they have been dismissed unfairly. There are certain key steps that employers must follow to make a redundancy dismissal fair:

STEP 1

The employer must identify the genuine redundancy situation. In law, there are three types of genuine redundancy, which are:

1. Business closure (closure of the business altogether)
2. Workplace closure (closure of one of several sites, or relocation to a new site)
3. Diminished requirements of the business for employees to do work of a particular kind

First of all, the employer must be satisfied that there is a genuine redundancy situation in line with one or more of the above. Employers should be careful not to mix redundancy with other reasons for dismissal, such as an employee’s performance, absence or disciplinary record. Employers will need to explain to those employees affected why there is a redundancy situation and why this means their role is at risk of redundancy.

A business closure will usually be fairly easy to identify. Many employers will be facing the harsh reality that their business will not survive the pandemic. A workplace closure can cover both relocation of a workplace and a simple site closure. The more common redundancy situation is ‘ diminished requirements of the business for employees to do work of a particular kind’, and this can arise where the employer restructures their workforce. Employers may decide over the coming weeks and months that, due to a downturn in work, they now require fewer employees to do the work. Alternatively, there may be a similar amount of work but the employer requires less staff to do that work on the premise that it is seeking to make better use of its resources.

An employment tribunal will generally not interfere with the business decision to make the role redundant (unless it is alleged by the employee that there was a discriminatory motive behind the redundancy).

Therefore, the first step for employers is to identify the genuine reason for redundancy.

STEP 2

The employer must act reasonably and follow a fair process. A tribunal will consider whether the decision to dismiss an employee was within what is known as the range of reasonable responses available to that employer. The key elements of a fair redundancy process include:

• Consultation

Employers must warn and consult with their employees or their representative(s), about a proposed redundancy. Individual consultation with those at risk of redundancy is fundamental to a fair process. For consultation to be meaningful, it needs to happen at a formative stage with the employee’s comments and suggestions being taken on board and considered. This will mitigate the risk of an employee claiming the consultation process was a sham and the decision had already been made to dismiss them. The focus of this article is on individual consultation rather than collective consultation (which is necessary where the employer plans to dismiss 20 or more employees during a 90 day period).

A fair and balanced consultation process should allow the employee to comment, challenge, make suggestions and consider alternatives (if any) to redundancy. There are no prescribed timescales within which consultation should take place. However, a usual redundancy consultation process will involve two to three meetings with each employee as a minimum. Employers should remember that the shorter the consultation, the more likely it is that its fairness may be called into question. It is good practice for employers to allow an employee to be accompanied to a consultation meeting by a colleague or trade union representative.

• Selection

The employer must adopt a fair basis on which to select for redundancy. An employer must identify an appropriate pool from which to select potentially redundant employees and must select against fair criteria. Where more than one job role is at risk of redundancy, the employer must consider the appropriate pool(s) of employees to be made redundant. Employers have flexibility in this regard but will need to apply their mind to the makeup of the pool. This should be carefully documented. Important things to consider with regards to the pool will be:
 

• What type of work is ceasing or diminishing
• The extent to which employees are doing similar work
• The extent to which employees’ jobs are interchangeable

Once the pool(s) have been established, the employer must then apply fair selection criteria to those in the pool(s). The criteria used should be objective and measurable. Employers need to be careful that the criteria used are not discriminatory (on the grounds of a protected characteristic) or too subjective. This can lead to claims for discriminatory and unfair dismissal. In additional, the application of the selection criteria must also be done fairly. Employees should then be consulted with about their scores and given an opportunity to ask questions (which, if they have been scored the lowest, they will most likely have). This is an important part of the consultation process.

• Alternative employment and alternatives to redundancy

Employers must consider suitable alternative employment. Alternatives to redundancy can include alternative vacancies in the company. An employer is under a duty to look for alternative employment within their organisation as part of a fair process. The search must be thorough but employers are not expected to create new roles. If an employee accepts an offer of alternative employment, it might be subject to a statutory trial period and any unreasonable refusal of an alternative role that has been offered to them could jeopardise an employee’s right to a statutory redundancy payment. This is a complex area and so I recommend specific advice is taken before employers make this argument.

• Appeal

An employee who has been dismissed due to redundancy has a right to appeal their dismissal. An appeal hearing should be arranged and someone who is independent and ideally more senior to the dismissing officer should chair the hearing.

Fail to prepare…

Planning is vital for employers when undertaking a fair redundancy process. A well-planned redundancy process can reduce stress for both the employer and employee, and is likely to achieve a better outcome for all concerned. A disgruntled employee is more likely to consider issuing an employment tribunal claim if the process has been handled badly or rushed. Rather, if the employer follows a fair, transparent, informative and balanced consultation process, this will go someway to mitigate the risk of an employee issuing tribunal claims.

PART TWO: Collective Consultation

Collective Consultation – key steps

The key steps employers must take to comply with the regulations set out in section 188 of Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”). TURLCA imposes the duty to collectively consult on employers. This can be a tricky process for employers to follow and careful planning will be imperative to achieve a fair, open and thorough process. The key steps and considerations for employers include the following:

When does the duty to collectively consult arise?

The duty to collectively consult arises where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.

As previously mentioned, a key part of a fair process is consulting with affected employees with an open mind and before decisions have been made. Consultation must therefore begin while the proposals are still at a formative stage in order to avoid employees alleging the consultation was a sham.

It is also important to be aware that any voluntary redundancies should be taken into account by the employer when assessing if the duty to collectively consult has arisen, ie they cannot be discounted so as to avoid the obligation under TURLCA.

Taking advice at an early stage in the process will enable employers to understand when the obligation arises and to put a clear plan in place.

With whom should an employer inform and consult?

The duty on employers is to inform and consult appropriate representatives of the affected employees (those affected by the proposed dismissals or by measures proposed to be taken in connection with the dismissals). Employers must also consult individually with potentially redundant employees and cannot neglect to do so, even though they are collectively consulting.

The term ‘appropriate representatives’ covers three categories of representatives:

• Representatives of a recognised trade union
• Directly elected representatives, elected by employees affected by the redundancy proposal for the purpose of consultation on that proposal
• A standing body of elected or appointed representatives not specifically elected for the purpose of redundancy consultation

If a trade union is recognised by the employer then they must consult with the trade union representatives. If there is not a recognised trade union then the employer can decide whether to elect representatives specifically for the redundancy exercise, or whether to consult with an existing consultation body.

With regards to the election of employee representatives, statutory rules apply and employers will need to follow these carefully. In summary:

• The employer must ensure that the election is fair
• The employer must ensure there are sufficient representatives to represent the interests of all affected employees (taking into account the number of affected employees)
• The employer should determine before the election the term of office of employee representatives
• Only affected employees can be candidates for election as an employee representative and an employer cannot unreasonably exclude an employee from election
• All affected employees on the date of the election can vote for employee representatives and are entitled to vote for as many candidates as there are representatives
• So far as possible, voting should be in secret

The process of collective consultation

Consultation must begin in good time and there are minimum time periods that apply depending on the number of the proposed redundancies:

• Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect
• For fewer than 100 redundancies, the minimum period is 30 days

Consultation begins with the provision of information on the proposals to representatives. The statutory scheme envisages two key stages:

• The provision of written information to the representatives
• Consultation on the proposed redundancies “with a view to reaching agreement” about certain matters

While it is not necessary for employers and representatives to reach an agreement, an employer should aim to seek agreement rather than confirm that all decisions have been already made or that they will not be reviewed during consultation. Consultation should also involve consideration of how to avoid the dismissals or reducing the number of dismissals (where possible).

Notifying Business, Energy and Industrial Strategy (“BEIS”) – Form HR1

Where the duty to collectively consult exists, the employer must also notify BEIS of the proposed redundancies and failure to do so is a criminal offence. This is, therefore, a key step for employers. Notification to the Secretary of State must be in writing on a form HR1, and must include the identity of any employee representatives to be consulted and the date on which such consultation began. The notification must be copied to all of the employee representatives who are to be consulted.

When there are proposed redundancies of between 20-99 employees within a 90-day period, notification must be provided and received by the Secretary of State at least 30 days before the first dismissal takes effect. When there are proposed redundancies of 100 employees or more within a 90-day period, notification must be received by the Secretary of State at least 45 days before the first dismissal.

What’s the risk of getting it wrong?

The risks are significant. Failure to comply with any of the rules on information or consultation, or on the election of representatives, can lead to a protective award being made by an employment tribunal. The maximum protective award is up to 90 days’ gross pay for each dismissed employee. This is an expensive liability. In addition, employees could issue claims for unfair dismissal at the employment tribunal. Alongside this, employers could also face adverse press coverage that could damage their reputation.

Summary

If collective consultation is carried out properly by the employer, the risk of a successful unfair dismissal claim will be reduced (albeit not altogether). Therefore, although the duty does pose additional obligations on employers, if the process is planned carefully, a positive outcome can be achieved in difficult circumstances.

We have a dedicated page, Coronavirus (COVID-19) – Legal advice and guidance, which we are continually updating with information as and when new measures come through from the government and other bodies.

For more information, contact:

Andrew Willshire, Solicitor, Paris Smith

023 8048 2160

andrew.willshire@parissmith.co.uk