What is a collective redundancy?
In the event an employer wants to make 20 or more employees redundant at one establishment within a 90-day period, certain legal requirements must be followed to avoid claims of unfair dismissal.
What does "one establishment" mean?
It is important to understand what 'one establishment' means. This is used to determine where the redundancies are taking place. The Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) does not provide a statutory definition. While each case turns on its own facts, the case of Usdaw & Wilson v Woolworths and others provided some clarity on the issue. The case questioned whether ‘establishment’ meant the whole of the relevant retail business, or the part of the business proposing the redundancies, or the specific unit to which a worker is assigned to, such as each individual store.
The European Court of Justice (The ECJ) held that one must consider the particular unit to which the employees being made redundant are assigned to carry out their duties. One must look at the number of employees assigned to individual stores (the “local employment unit”) rather than looking at Woolworth's business as a whole.
Case law further holds that the business or undertaking does not need to have:
Any legal, economic, financial, administrative or technological autonomy;
A management structure/staff that may independently affect collective redundancies;
A different geographical location to other units and facilities of the undertaking; and
Does not need to belong to the employing organisation (rather than to a third party).
Collective redundancy consultations
Firstly, you must notify the Redundancy Payments Service (RPS) before commencing consultations. The deadline depends on the number of proposed redundancies. You can be fined an unlimited amount if you do not notify RPS.
Consultation must be full, genuine, and meaningful, with a view to reaching agreement on ways of avoiding the redundancies, reducing the number of staff at risk and mitigating the effect of the dismissals on affected employees. Consultation must be completed before notice of dismissal is given to any of the employees concerned. Failure to do so may lead to an Employment Tribunal award of up to 90 days' pay to each affected employee, affected employee means anyone whose role will be impacted in any way by the redundancies even if not everyone is at risk.
19 or fewer employees - No set rules but it is good practice to fully consult employees and their representatives as the Employment Tribunal could decide that you have dismissed your staff unfairly if you did not consult them.
20 to 99 employees - Consultation process must start 30 days before a redundancy is made.
100 or more employees - Consultation process must take place 45 days before a redundancy is made.
For redundancies of 20 –99 employees with recognized trade unions or elected representatives, collective consultations must take place at least 30 days before notification of redundancies and for 100 or more employees at least 90 days beforehand.
You must provide the employee representative or staff with written details of:
the reasons for redundancies;
the total number of employees to be made redundant and their job categories;
how you propose to select employees for redundancy;
how you plan to execute the redundancies; and
the method being used to calculate redundancy payments.
You must give the employee representative and staff enough time to consider them.
What is an elected employee representative? If the employees are members of a trade union, then the trade union representative must be consulted on behalf of the employees. Where there is no union the employees must elect employee representatives, who employers will consult with during the consultation. If the employees fail to elect a representative, the employer may provide information directly to the employees on an individual basis. Failure to consult
Failure to comply with the statutory requirements of collective consultation can lead to an Employment Tribunal claim for a protective award for each affected employee up to the value of 90 days' pay.
The claim must be brought by either each individual affected employee or the recognised trade union or employee representatives if elected. The employee may qualify for a protective award, even if they do not yet qualify for statutory redundancy pay.
An employer has a defence to such a claim where it can show that there were special circumstances which meant consultation was not reasonably practicable. This defence is very difficult to prove and even cases of insolvency do not usually meet the threshold unless there were unusual and exceptional circumstances. What about redundancies of fewer than 20 employees?
In comparison there are no imperative rules to follow for redundancies of fewer than 20 employees. However, it is good practice to consult employees and their representatives to avoid potential cases of unfair dismissal.
We are specialist Employment Solicitors based in Bedford and London and operating nationally. If you need advice on re-organisation and redundancies or if you need assistance with reviewing your contracts of employment or preparing letters or other communications to your staff, call us on 01234 938089 or e-mail us at email@example.com and one of our Helpline team members will be in touch.