BREXIT – Redundancy
This article is for general information only. Employment law is a highly specialised area and you should only act or refrain from acting after receiving full professional advice on the facts of your particular case. This article is for general information and does not constitute investment advice. Always consult an IFA.
For most UK businesses leaving the EU is a concern because of the uncertainties. In the short term, these uncertainties could be bad for business and most businesses will adopt a “wait and see” approach. During this period of uncertainty, businesses may need to reduce their workforce and some businesses may opt to relocate their operations to a county within the EU.
This article provides guidance on an employer’s obligations in a redundancy situation and considers the enhanced collective redundancy obligations (under the Trade Union and Labour Relations (Consolidation) Act 1992 (commonly known as TULRCA)) which will be activated when an employer proposes to make 20 or more employees redundant within a period of 90 days.
For more information on the relocation of a business, please see our article on the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
Redundancy and Collective Redundancy
Step 1 will be to establish whether there is a genuine redundancy situation. There will be a redundancy situation where there is a reduced requirement for employees to carry out work of a particular kind, a closure of a business or closure of the place of business.
Step 2 will be to consider the appropriate pool of employees who are at risk of redundancy and set objective selection criteria. This is an easy task where the employer is considering a closure of business or a closure of the place of business as it will most likely involve all employees, and the selection criteria is not of real importance.
However, it is less easy where the employer is considering reducing its workforce as both the selection pool and criteria will need to be considered carefully.
Step 3 will be to notify the Secretary of State of the proposed redundancies if 20 or more redundancies are being proposed in a 90 day period.
Step 4 will be to meet with the affected employees. If there are 20 or more redundancies being proposed, the employer will have to consult with “appropriate representatives” of the affected employees. The appropriate representative can either be the representatives of a recognised trade union or a directly elected representatives or a general standing body of elected or appointed representatives.
There are statutory rules which govern the election of employee representatives specifically for the purposes of collective consultation. These should be observed as a breach of the rules can of itself give rise to a claim for a protective award.
Step 5 will be to confirm the information given during the meeting in writing. As a minimum the following should be provided in writing:
- The reasons for the proposed redundancies;
- Numbers of employees who are at risk of redundancy;
- Proposed selection criteria;
- Proposed method of carrying out the dismissals – i.e. the procedure and period over which the dismissal are to take effect;
- Calculation of the redundancy payment; and
- Information relating to the use of agency workers.
Step 6 will be to consult with the employees and/or employee representatives. This would seem logical but surprisingly there are a number of employers who fail to consult with the affected employees. An employer is obliged to conduct consultation with a view to reaching an agreement.
This does not mean the employer has to agree to any counter proposals made by the employee representative (or employees in the case of fewer than 20 proposed redundancies).
The consultation should include consultation on ways to avoid dismissals, reduce the number of redundancies and mitigate the consequences of dismissals as a minimum.
During the consultation, employers must also provide details of any suitable alternative employment to the affected employees.
The consultation period will depend on the number of redundancies proposed. Where an employer is proposing to dismiss 100 or more employees within a 90 days period, consultation must begin at least 45 days before the first dismissal take effect. Consultation must begin at least 30 days before the first dismissal takes place where an employer is proposing to dismiss between 20 and 99 employees in a 90 day period. These are minimum requirements.
Step 7 will be scoring each of the potentially redundant employees using the selection criteria. If there is a closure of business or part of a business then this step may not be necessary.
Step 8 will be to write to the individuals who have been provisionally selected for redundancy. The letter must include certain details and should make it clear that no final decision has been at this stage. Again this may not be applicable if there is a closure of business or part of a business.
Step 9 will be to have individual meeting to discuss the scores and consider any comments from the employees.
Step 10 will be to confirm the dismissal on grounds of redundancy (if applicable following step 9) and set out the payments that will be made to the employee following the termination. Employers will usually have the choice to make the employee works their notice period or make a payment in lieu of notice (this is subject to the terms of the contract of employment). The employee will also be entitled to a payment in lieu of any accrued but untaken holidays, and a redundancy payment. Usually, the redundancy payment will be statutory and based on the employees’ age and length of service. However, it is possible for employees to be entitled to an enhanced redundancy payment if it is provided for in their contracts of employment or if employers have historically paid enhanced redundancy payment.
Failing to adopt a fair redundancy procedure could give rise to an unfair dismissal even where there is a genuine redundancy situation.
Failing to comply with the informing and consulting obligations under TULRCA could result in each employee being awarded a protection award of up to 90 days’ uncapped pay.
Failing to make the relevant payments following termination could give rise to a breach of contract and/or a claim for unlawful deduction of wages. If there is a breach of contract then any restrictive covenants could become null and void. Accordingly, it is important to check the terms of the contract of employment and common practice to ensure compliance.