The Government, via the Employment Rights Bill, plans to change the law surrounding the trigger for collective redundancy consultation to be instigated by employers.
If you wish to provide input on the proposals discussed in this article, the current Government consultation can be accessed here. This closes on 2 December 2024.
Background
Currently, an employer that is proposing 20 or more redundancies ‘at one establishment’ within a period of 90 days must go through a process of collective redundancy consultation before the redundancies can go ahead.
Consultation with representatives must begin “in good time”, and at least 30 days, before the first dismissal where under 100 dismissals are envisaged, or 45 days where 100 or more dismissals are envisaged.
Failure to comply can result in claims for a “protective award” of up to 90 days’ uncapped pay for each affected employee.
Proposed changes
The Employment Rights Bill proposes to remove the reference to ‘one establishment’.
The change was prompted by a reorganisation involving Woolworths in 2011, during which each branch of Woolworths was treated as a separate establishment, so the duty to inform and consult collectively only applied to individual branches where 20 or more dismissals were envisaged.
The proposed change removes the often problematic concept of an ‘establishment’, which was the subject of a complex multi-factorial test.
The Government has also said that, in 2025, it will review the duration of statutory consultation periods and will consider increasing the period from 45 to 90 days when an employer is proposing to dismiss 100 or more employees.
Implications of the proposed changes
The implications of the proposed changes are that:
- more redundancy exercises will be caught by the obligation to consult collectively;
- in turn, there will be a greater risk of non-compliance, particularly where one batch of redundancies leads to further redundancies being made within the relevant time-frame;
- where the consultation exercise involves two or more sites, the representatives from one site may have little or no interest in the other(s);
- larger employers may be encouraged to put in place continuous collective consultation processes (anticipating exercises that may arise in the future), which could lead to a reduced quality of consultation;
- employers with multi-employer entities (i.e. different companies employing staff at different locations) will not be impacted by the change;
- specifically, the removal of the reference to ‘one establishment’ means that the question of territorial scope may become less clear, albeit hopefully this issue will be clarified by the new regulations; and
- the proposed increase to the collective consultation period will prolong the period of uncertainty for staff and enhance the costs for employers.
What the proposed changes do not do
The proposed changes do not:
- deal with concerns regarding the quality of collective redundancy processes, which in many instances result in allegations that they involved little more than ‘lip service’ to the underlying issues; and
- give individual employees the right to apply for a penalty in most cases. The right to bring a claim for non-compliance will normally remain with the representatives, who may not be inclined to pursue such a claim.
Non-compliance
In the event of non-compliance, the employer is currently subjected to a penalty of up to 90 days’ (uncapped) pay known as a protective award. The Government is consulting on increasing the penalty, potentially removing the limit of 90 days altogether, although it is unclear how an unlimited penalty will be assessed.
Timing
It is anticipated that the Government’s reforms will come into force in April 2026.
