Key Considerations for Large-Scale Redundancies

Compensation
posted by KeithDaniel

Following recent announcements from Mothercare and Marks & Spencer to close down multiple stores across the UK, our Employment Partner, Fabio Grech, discusses some of the key issues that arise during large-scale redundancies:

How many employees will be dismissed? If 20 or more employees are to be dismissed at one establishment within 90 days, consultation must begin at least 30 days before the first dismissal takes effect. If the number of employees to be dismissed exceeds 99, consultation must begin at least 45 days before the first dismissal takes effect.

“Redundancy” has a wide interpretation.   For the purposes of calculating how many employees are to be dismissed, you must also include any employees whose terms and conditions are being substantially varied as part of the business reorganisation.  This is because, if the changes are not agreed, the Employer may ultimately need to terminate those employment contracts and issue new terms to effect the variation.  This counts as a potential dismissal.

The consultation period.  Employers often confuse the 30 /45 day period as a minimum consultation period – but actually the set period relates to the time which must elapse before the first dismissal takes effect.  It is therefore possible that consultation is straightforward and takes little time.  In that case there’s no reason to keep consulting throughout the period for its own sake (as long as no one is dismissed before the set period).  On the other hand, the legislation provides that consultation must begin “in good time” and so it possible that your 30/45 days won’t be enough when you take into account time delays for logistical reasons or for a Christmas shut-down, in which case it would be wise to continue beyond the set period to ensure consultation is meaningful.

What is an establishment? An establishment is not the entire business undertaking. Rather, it is the place at which “at risk” employees are assigned to carry out their duties (even if that unit doesn’t have its own management to carry out the redundancies).  The calculation of 20 (or more) employees will be considered in this context.

Employers should consult all affected employees (even those who may not be dismissed).  The duty extends also to those employees who may not be at risk of dismissal but nevertheless affected by the restructure proposals, for example employees who may lose reporting lines, or whose day to day work will change as a result. 

Who are the appropriate representatives to be consulted?  Employers need to consult trade union representatives where the affected employees fall within a category for which that Union is recognised.  Employers often mistakenly think that employees need to be union members for the union to consult on their behalf.  They merely need to fall into a category for which the Union is recognised.  Where a trade union is not recognised in respect of the affected employees, employers may choose to consult with an already established employee representative body (provided it adequately represents the affected employees), or alternatively, it may appoint representatives specifically for the redundancy consultation.

Ensure that the election of staff representatives is even-handed.  If the employer needs to appoint staff representatives, they should take legal advice to ensure that their process for appointing them is fair.  The process will involve ensuring there are enough constituents to ensure that different facets of the workforce are adequately represented, inviting all staff to nominate their preferred representative and holding ballots to select them.  Note that the 30/45 day periods do not commence until employee representatives have been appointed (a process which can take a few weeks in itself).  This is important to bear in mind when scheduling the entire exercise.

Make sure the correct information is imparted from the outset. The statutory consultation period will not be deemed to have commenced until representatives receive information on: -

  • the reason for the proposed dismissals;
  • the numbers and descriptions of potentially redundant employees;
  • the total number of employees of such description employed at the establishment;
  • the proposed selection method;
  • the proposed method of dismissing (taking into account any agreed procedures);
  • the proposed calculation of redundancy payments;
  • information about the employer’s use of agency workers. 

You don’t want to be in a position where you have to extend the consultation period because you failed to give the correct information at the start.

Don’t forget individual consultation. In addition to an employer’s duty to consult with trade union / employee representatives, the employer must also undertake an element of individual consultation.  As a minimum, any employee facing dismissal must be given the opportunity of at least one, individual (face to face) consultation. 

As you can see, there are many matters to think about if you are contemplating large-scale redundancies.  We routinely advise on such exercises and, if you need more information on the issues raised in this article, please contact our Fabio Grech on 029 20345511, fgrech@berrysmith.com.

Fabio Grech - Partner