By Angela West - Friday the 22nd of May
The Coronavirus pandemic continues to wreak havoc across the economy both within the UK and globally. When we think of great British commercial institutions, you may well think of British Airways or Rolls Royce. Unfortunately, even these great British icons have not evaded the effects of the pandemic with British Airways announcing the need to make circa 12,000 employees redundant, and Rolls Royce announcing only this week the need to make 9,000 employees redundant globally.
Whilst the Coronavirus Job Retention Scheme may have provided a short term safe haven for many employees, with the grim economic forecast, the furloughing of employees may just be delaying the inevitable. Of course, it is not just the likes of British Airways or Rolls Royce who have fallen victim to the pandemic, but it is the ripple effect it will have on all of those businesses who supply to British Airways and Rolls Royce who are also likely to face hardship.
If you are a business who finds yourself in a similar situation then please do get in touch with our Employment Team as we will be able to advise you on not just redundancies, but also ways to potentially restructure your business in a way which could reduce the impact on your employees.
If you are a company who is considering a restructure which involves redundancies on a larger scale then please do bear in mind the potential need for collective consultation.
The need for collective consultation will arise where as an employer you are proposing to dismiss as redundant 20 or more employees within a period of 90 days or less. In redundancy cases the collective consultation period must take place over either 30 days (for 20 – 99 job losses) or 45 days where an employer is considering dismissing by reason of redundancy a 100 employees or more.
If your business recognises a Trade Union at the work place, then the consultations must take place with the Union Representatives. Otherwise employers must consult with employee representatives. There is no specific time limit for how long the period of consultation should be, but the 30 day / 45 day consultation periods are the minimum periods before any dismissals take effect. Employers who find themselves in such situations must also complete the necessary documentation to notify the Secretary of State.
The consequences of not following the collective consultation obligations can be significant and can result in a protective award of up to 90 days gross pay per effected employees. With large scale redundancies, a protective award can result in a substantial sum of money having to be paid out by the employer in addition to notice, accrued holiday and statutory redundancy payments. An order to make a protective award could thensend the business nose diving into insolvency.
We would also urge employers to consider circumstances which may trigger the collective consultation process and specifically at what point the employer is “proposing to dismiss” as redundant, as set out in Section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992. This very point was at the forefront of a recent Judgment in the Case of Keeping Kids Company (in compulsory liquidation) –v– Smith & Ors 2018. Keeping Kids Company was a charitable organisation that provided support for deprived children. The charity experienced financial difficulties and applied for an emergency of £3m from the Government. The application was granted, but the charity ran into further difficulties with safeguarding issues being raised which meant that the grant funding was withdrawn. The decision to withdrawn the funding plummeted the charity into compulsory insolvency. Although the charity had “planned” to consult with its staff on redundancies, the withdrawal of the funding meant that they could no longer do it.
Claims were brought by more than 100 employees of the charity for failure to collectively consult prior to their redundancies, in breach of the legislation. One of the salient point of the case being that the obligation to begin collective consultation should have occurred when the grant application was made as at this stage there was a clear intention to dismiss at least 20 employees for redundancies. Accordingly, collective consultation may well be triggered at a point in time even if the intention to dismiss is provisional and as an employer you have not yet identified which employees are potentially at risk. In the aforementioned case over a 100 employees were awarded the full 90 day protective award.
Another factor to consider is how you are going to collectively consult, especially if many employees who could be at risk of redundancy are on furlough leave. Employers are required to give consideration to the principal of a fair consultation which may involve longer timescales in order to overcome the practical difficulties which employers will inevitably face when trying to consult with employees who are furloughed.
If as an employer you find yourself in the impossible situation of having to consider restructuring or redundancies which could trigger the collective consultation process, please ensure you give yourself enough time in order to comply with the minimum periods for collective consultation, whilst also addressing the practicalities of doing so.
Please do get in touch with a member of our employment team if you have any queries regarding redundancy or restructuring your business by emailing firstname.lastname@example.org