This guidance note explains the obligations on employers when carrying out collective redundancies. A separate Weightmans guidance note explains employers’ individual redundancy obligations.
Whenever an employer is proposing to make redundancies and it recognises a trade union, as a matter of good employee relations and fairness, the employer should collectively consult with the trade union about the proposed redundancies. This is irrespective of the number of redundancies proposed.
Where the employer is proposing to dismiss 20 or more employees at an establishment within a 90 day period or less, then there is a statutory obligation on the employer to consult on a collective basis with representatives of affected employees. This statutory obligation arises whether or not the employer recognises a trade union (section 188(1) Trade Union and Labour Relations (Consolidation) Act 1992 (‘TULRCA’).
In addition to this, there is also a duty to inform the Secretary of State for Business, Innovation and Skills about the proposed redundancies. This is done by submitting form HR1 to The Insolvency Service, who must receive the form at least 30 or 45 days before the first dismissal, depending on whether a 30 or 45 day collective consultation period is required. A copy of the completed HR1 should be given to the employee representatives at the start of the collective consultation process (see below). (Changes to the maximum period of consultation for 100 or more employee reduced from 90 days to 45 days from 6 April 2013.)
“Redundancy” has a wider meaning in the context of collective redundancy consultation than the definition which applies for the purposes of individual fair dismissal legislation (as set out in the Employment Rights Act 1996 (‘ERA’):
A "dismissal" will include an actual termination by the employer (with or without notice), the expiry of a fixed-term contract which is not renewed on the same terms and may also include a voluntary redundancy where it occurs in response to a proposal by the employer to make redundancies. (Hence a proposal to make only voluntary redundancies may still trigger the obligation to collectively consult). The statutory definition of dismissal focuses on what is happening to the individual employment contract, rather than to the employment relationship as a whole. Thus an employee can be dismissed where the employer brings their current contract to an end, even though he/she continues to be employed by the same employer under a new contract i.e. where an employee is made redundant from their existing job but is redeployed to suitable alternative employment.
It is the number of employees proposed to be dismissed that counts towards the numbers and so agency workers need not be considered provided they truly can be said to be agency workers and not employees. However the information required to be provided as part of the collective consultation process includes information pertaining to agency workers, see below.
Fixed term employees and temporary employees will count towards the numbers unless the fixed term employees have contracts of three months or less or are recruited to carry out a specific task which is expected to end before three months has expired, provided that in either case the employees have not been employed for more than three months. On the basis that casual workers count as employees during the period of their assignment, they too would count towards the numbers if engaged on an assignment.
Fixed term employees whose contracts expire at their stated end date and are not renewed will not count towards the numbers.
Potential new starters will also count towards the numbers if they have been offered and have accepted a contract of employment, even though they have not yet commenced the role. Volunteers for redundancy will also count towards the 20 + employees.
However collective consultation should take place with appropriate representatives of affected employees. Affected employees are not just those employees who may be at risk of redundancy but also employees who will be impacted by the redundancy measures e.g. they may be required to take on additional work, be subject to a new system of work or have a change of reporting line. Further, the employer must take care not to forget to consult ‘atypical’ affected employees such as:
A word of caution though. If an employer proposes to dismiss as redundant 10 employees and then a further 12 employees are proposed within a 90 day as the total number of redundancy proposed is over 20, then the statutory collective consultation obligations will kick in.
It has been understood that “Establishment” means the unit to which the proposed redundant workers are assigned to carry out their duties and in the vast majority of cases, a specific geographical location would count as one “establishment”. In the recent case of USDAW –v- WW Realisation Ltd the EAT held that the words “one establishment” should be disregarded. However, this was appealed to the ECJ, who held that the establishment is the unit to which the workers made redundant are assigned to carry out their duties. We are awaiting the Court of Appeal’s decision on the USDAW case following this but it is likely to overturn the EAT decision. This effectively meant that the question is not whether or not the employer proposes to dismiss 20 or more employees in that particular workplace but rather within its business.
An employer is obliged to enter into collective consultation where it is “proposing to dismiss” as redundant 20 or more employees at one establishment. This means that:
The overriding obligation under section 188 TULRCA is that consultation should begin "in good time" before the first of the redundancies take effect. TULRCA also states that specific minimum periods must elapse between the start of the consultation process and the date of the first dismissal, depending on the number of dismissals being proposed:
[NB above there are some potentially important differences between the Directive and TULRCA, including with regard to the timing of the consultation process. Brief details are set out on the next page.]
The 45 and 30 day periods are minimum requirements: in some cases, these minimum periods may in reality be insufficient for there to be proper consultation on all the issues about which the employer is obliged to consult, particularly where fixed holiday periods, such as factory shutdowns, occur during the consultation process.
Given that “good time” is judged according to how much time is left until the proposed date on which the first redundancies are to take effect, the employer must form a view on:
A separate duty to inform and consult may, however, arise much earlier if there is an information and consultation agreement in force. The Standard information and consultation provisions, for example, require the employer to inform and consult with a view to reaching agreement over "decisions likely to lead to substantial changes in work organisation or in contractual relations". This could mean discussing business decisions that could potentially lead to redundancies, before those decisions are made. However speculative proposals will not fall into this category until they become plans which are likely to happen.
Consultation will typically begin with the announcement of proposed redundancies and the provision of information to the employee representatives (see below). Where it is necessary to elect those representatives, consultation cannot begin until after the representatives have been elected. The date on which the requisite statutory information is provided to the representatives (or, where not all information is provided at once, the date on which sufficient statutory information is provided for meaningful consultation to take place) will typically be taken to be the date on which consultation begins.
The obligation on the employer is to consult "appropriate representatives" of “any of the employees who may be affected by the proposed dismissals or by measures taken in connection with those dismissals” (section 188(1), TULRCA). The employer must therefore identify first the affected employees and thereafter their appropriate representatives.
The "affected employees" are both those immediately at risk of dismissal and also those affected by measures associated with the proposed redundancies. In the context of collective redundancies “measures” is likely to include any organisational step taken in connection with or as a result of the proposed redundancies, such as new systems of work, new working hours or arrangements, proposed variations to contracts of employment and new reporting lines.
"Appropriate representatives" is an umbrella term, covering three separate potential categories of representatives:
Employers must consult with trade union representatives rather than any other category of representative where the affected employees fall within a bargaining unit in respect of which an independent trade union is recognised by the employer (section 188 (1B) TULRCA). This is even though not all affected employees in the bargaining unit may be members of the trade union. There may also be additional and slightly different obligations to consult with other representatives under a Works Council or Staff Forum agreement. A thorough search needs to be carried out to ascertain what collective, recognition, framework, works council or staff forum agreements exist.
Where there is a recognised union, but it does not cover all the affected employees, then the employer must consult other appropriate representatives in respect of those employees who are outside the bargaining unit.
Where there is no recognised trade union in respect of the affected employees then the employer may choose to consult either:
In practice, most employers will choose to consult with representatives directly elected by the affected employees rather than a standing body of representatives as there are certain advantages in choosing the former – not least the certainty that they have the authority to enter into the collective redundancy consultation. If the numbers involved are not substantial, and there are no appropriate representatives, then employees may decide not to hold elections. If so, the employer can continue with the redundancy process after a reasonable period, with the employees being provided with the statutory information and consulted with on an individual basis. Even if a minority of employees wish to hold elections, they are entitled to do so and their appointment should be for all future redundancy exercises (which is more efficient and safer for future exercises). If the number of candidates in each constituency is the same as the number of proposed representatives, it is logical to simply appoint the candidates rather than vote them in if their success is guaranteed.
The number of representatives needed to conduct collective consultation is not specified by law but employers are expected to ensure there is a sufficient number to properly represent the interests of the affected employees. You should also take account of the number and type of employees affected and any unusual circumstances such as widespread geographical locations or varying shift patterns. Link to Ballot Form for the election of representatives and link to notice confirming election of elected representatives.
According to section 188(4) TULRCA, the following information must be provided by the employer as a minimum: Please see Letter to Trade Union and elected representatives - start of collective consultation.
This information must be provided in writing to either the appropriate representatives, once elected, or to the recognised trade union representatives. The only circumstances in which the information should instead be provided to all of the affected employees is where they have failed to elect representatives within a reasonable time frame.
The information must be provided to the employee/union representatives in a sufficiently understandable form as to enable meaningful consultation to take place: the representatives must have an adequate opportunity to fully understand the issues over which they are being consulted - the proposed measures, their effect, and the reasons for them, etc.
It is not necessary for the employer to provide all of the statutory information at the outset of the consultation: consultation can be deemed to have commenced as long as the employer has provided sufficient information to enable meaningful consultation to take place. For example, the employer may not initially be ready to give details about proposed selection criteria and how the process of selection will be undertaken. This information could instead be provided at a later stage, after consultation has begun about ways of avoiding or reducing the redundancies.
The information to be provided to employee/union representatives should break down the proposed dismissals by categories of employee and identify the total number of employees in each category employed at the establishment. At this stage the employer will also need to identify appropriate redundancy pools and establish whether selection for redundancy is required: where all of the employees in the selection pool are to be dismissed then no selection criteria will be required; however, selection criteria will be required where the proposal is to reduce the numbers of employees in the pool. Our guidance on redundancy deals with the issue of pooling and the selection process.
The information provided to the representatives must set out proposals for any redundancy payments over the statutory basic entitlement. As a starting point, the employer will need to consider whether there are existing, expressly agreed redundancy severance terms or terms which apply by custom and practice. If there are no existing terms then the employer will have to formulate some (assuming that it proposes to pay more than the statutory minimum). When doing so, consideration will need to be given to matters such as:
From a practical, rather than legal point of view, in addition to the statutory information letter to be provided to the representatives of the affected employees, the employer will need to prepare an overall communication process so that they – rather than the representatives – control the ongoing communications strategy. Employers should also take care to identify employees on long-term sick leave, maternity, paternity , adoption or parental leave, secondment and holiday, ensuring that they are included in any communication process. In addition to employee communications, the employer may need to develop appropriate communications to customers and suppliers, as well as Stock Exchange announcements (where relevant), letters to local MPs and press releases.
According to section 188(2) TULRCA, the subject matter of the consultation must include ways of:
and must be undertaken by the employer “with a view to reaching agreement with the appropriate representatives”.
An employer must consult over the business reasons for the redundancies as part of the obligation to consult over ways in which the redundancies can be avoided. For example, if an employer is proposing to close a particular site, which will result in the loss of jobs, consultation on avoiding the redundancies should include consultation about whether or not the site should close and about alternative solutions which would keep it open.
In addition to consulting over the proposed dismissals, an employer should also consult over the proposed ‘measures’ to be taken in connection with those proposed dismissals (e.g. new reporting lines or organisational arrangements as a result of the proposed redundancies). It should be noted that there may also be an obligation to consult about ‘measures’ under an information and consultation agreement, depending on the type and scope of that agreement.
In the light of this, the employer must be clear about the business case for the proposed redundancies and have collated any relevant supporting documentation to be provided during the consultation. The aim must be to provide the representatives of the affected employees with a clear explanation of the business case, supported by the relevant information, so as to allow them an opportunity to fully understand the proposals and prepare their response.
In addition, and given the need to consult about ways of reducing or avoiding the proposed redundancies and about mitigating the consequences of the proposed dismissals, the employer should provide the representatives with details of, and be ready to discuss, matters such as its considerations to-date about the alternatives to making redundancies (e.g. short-time working or job sharing), and the opportunities for redeployment, voluntary redundancies, etc.
Case law has established that fair collective consultation involves the employer:
On a practical level it is recommended that a timetable and outline agenda for the consultation process is discussed and agreed at the first consultation meeting with the representatives of the affected employees. The following approach may be appropriate:
Thereafter, consultation should be about the process of implementation, including the selection criteria, how they will be applied, how the individuals will be consulted, and proposed timescales. Alternative employment and other forms of support for those dismissed may also be discussed at this stage. The employer needs to think about when the redundancies are likely to take place and whether it needs to retain some staff until the end of certain projects and/or for any “handover” periods.
It is advisable for the organisation to have its own note taker at each consultation meeting so that proper notes can be taken. At the end of each meeting it can be useful to make a note of what items have been agreed as part of the consultation process and what items remain to be consulted on; this can assist keeping under review what matters remain outstanding. Some companies will choose to update the workforce on how collective consultation is progressing by issuing a Question and Answer document to the workforce or something similar. Whilst there is no obligation on an organisation to do this, it can be useful to ensure that consistent answers to questions are being communicated to the workforce and to ensure that all employees are covered (for example in unionised environments where not everyone is a union member).
There are two limited (and rare) circumstances in which an employer may be excused from the need to enter into full collective redundancy consultation. (Both represent a high risk for the employer and it is recommended that legal advice be sought if it is believed that either situation applies):
There is no generic category of "special circumstances", and the existence of special circumstances is therefore judged on the facts of the case although it is unlikely that anything but the most exceptional situations will be judged as being special. The burden of proof is on the employer to show the existence of special circumstances and also to show that such steps as were reasonably practicable were taken to comply with the particular requirement concerned.
Complaints can be made to an Employment Tribunal in relation to a breach of the statutory rules governing the election of employee representatives and in relation to a failure to inform and consult more generally. If the tribunal finds a complaint well founded, it must make a declaration to that effect and it may also make a protective award. As explained below, protective awards can be very expensive for an employer
A protective award can be up to 90 days’ gross actual pay for every affected employee in respect of whom the employer has failed to comply with any of the collective redundancy consultation requirements. (Note that the maximum level award of 90 days’ pay can still be applied despite the reduction in the maximum consultation period from 90 to 45 days). The purpose of the award is to compensate the employees for the loss of the benefit of consultation rather than for their individual financial loss. Consequently, receipt of wages during the protected period will not reduce that employee's entitlement under the protective award.
The length of the protected period is at the tribunal's discretion. The tribunal must make such award as they consider "just and equitable in all the circumstances having regard to the seriousness of the employer's default", subject to a 90 day maximum in all cases. The Court of Appeal has established the following principles:
As an illustration of how expensive it can be if an employer fails to fulfil its collective redundancy obligations: if the average salary of those being made redundant is £26,000 and 40 employees are dismissed, that is maximum liability of £260,000. Such claims for breach of Section 188 cannot be settled in advance of Tribunal proceedings by a Compromise Agreement, but only via ACAS conciliation.
The collective consultation provisions of TULRCA differ from those of the European Collective Redundancies Directive in a number of important aspects. These differences are of particular relevance for employers against whom the Directive can be directly enforced. These include emanations of the state such as government departments, local authorities, health authorities, further education corporations, police authorities and NHS trusts. In addition, case law has established that privatised utilities such as electricity and water companies could also fall into this category.
The key differences between the obligations under the Directive and under section 188, TULRCA can be summarised as follows: