EMPLOYMENT RIGHTS BILL: IN DEPTH SERIES - COLLECTIVE CONSULTATION
Closing the P&O and Woolworths loopholes…Famous Last 3 Words
Consultation is at the heart of any fair redundancy process.
Where that redundancy process could see the dismissal of 20 or more employees ‘at one establishment’, consultation needs to be carried out on both a collective basis (via employee representatives) and on a 1 to 1 basis, with those affected.
The consultation process must begin in good time and in any event:
a. At least 45 days before the first dismissal for 100 or more proposed redundancies at one establishment.
b. At least 30 days before the first dismissal for 20-99 or more proposed redundancies at one establishment.
In the collective part of the process, employers must consult with representatives with the aim of reaching agreement about ways to avoid, reduce or mitigate the effect of the redundancies being proposed (s.188 Trade Union Reform and Employment Rights (Consolidation) Act 1992).
Where employers do not comply with these obligations, each employee can make a claim to an Employment Tribunal for a protective award of up to 90 days’ pay. The protective award is designed to penalise the employer and to reduce any financial benefit to the business gained from not following consultation requirements.
Form HR1
Employers must also file Form HR1 with the government at the outset of any collective process, giving advance notice of the redundancies it is proposing. This obligation is backed by a criminal sanction in the case of noncompliance – being an unlimited fine.
There is no equivalent sanctions for a breach of the duty to notify the competent authority of a vessel’s flag state under s.193A. This meant that, in the case of P&O Ferries, there was no criminal liability for the company when it failed to give enough notice to the relevant authority of its large scale redundancy plans.
Meaning of ‘at one establishment’
You may recall the extensive litigation which followed the closure of Woolworths in January 2009, when thousands of employees were made redundant within a 90-day period.
The litigation in that case arose over the meaning of ‘at one establishment’, and specifically whether Woolworths were right to regard each individual Woolworth store as a separate establishment. The case went all the way to the European Court of Justice, who decided that it could.
“We look forward to working with clients on these issues and the practical reality of consultation ‘across site’. We expect there will be much more online consultation, which of course may not be suitable for all employees; adjustments may need to be made to these processes to ensure proper consultation take place with those affected.”
This meant that the business had no obligation to collectively consult with those staff who had been at stores employing 19 or less employees. Consequently, approximately 4,500 of them missed out on protective awards.
Since Woolworths, most employers take a site by site basis to redundancies (albeit each case should be looked at on its own facts to determine if this is the correct approach).
Employment Rights Bill (the Bill) – proposed changes
The Bill seeks to toughen up the collective redundancy notification requirements for operators of foreign vessels, like P&O Ferries, meaning a ferry planning to dismiss 20 or more employees will be legally required to notify the Government using Form HR1, or face fines and potential prosecution.
The Bill also seeks to extend the scope of this duty to collectively consult, by removing the words ‘at one establishment’.
This will mean that, where employers who are proposing to dismiss as redundant a total of 20 employees or more across the whole business, collective consultation obligations are triggered – even where, for example, there are entirely separate redundancy processes at different sites, in different divisions of the business.
We have set out an example below of the current position versus the position under the ERB
*What is not clear currently is whether employers will need to carry out one single consultation exercise, or if they can carry out three separate ones, or if those employees who have already been dismissed (before collective consultation obligation were triggered) would be entitled to a protective award – which seems unfair.
One commentator has suggested an amendment to the ERB providing that genuinely separate redundancy exercises – not driven by a common underlying business reason – should not be aggregated in this way, to avoid employers being caught by surprise when a series of separate exercises occurs within the same 90 day period. We agree with this view and will be submitting our response to the consultation to make this suggestion.
Please note the consultation opened on 21 October 2024 and closes on 2 December 2024. See the full details here.
Other items on the agenda
Within the consultation Q&As, the government is consulting about:
increasing the maximum protective award (to 180 days’ pay or an uncapped amount) and b) allowing employees to claim interim relief (effectively preserving their pay until a tribunal hearing).
These amendments would make it more difficult for employers like P&O to avoid their collective obligations by ‘buying off’ employees (effectively offering employees the equivalent of a protective award)
The government has also said that it will consult next year about doubling the minimum consultation period when an employer is proposing to dismiss 100 or more employees (from 45 to 90 days).
It seems most likely that these reforms will happen together at some point in 2026 although the timing is uncertain.
Practical considerations
Larger employers, with multiple sites across the UK, will inevitably reach the ‘20 or more’ trigger more frequently, and we anticipate that some of our larger clients may find themselves in repeated collective redundancy processes.
We anticipate that these employers will need to implement sophisticated procedures for tracking redundancies across the business (and for tracking settlement agreements which have been entered into as an alternative to going through a redundancy process).
We look forward to working with clients on these issues and the practical reality of consultation ‘across site’. We expect there will be much more online consultation, which of course may not be suitable for all employees; adjustments may need to be made to these processes to ensure proper consultation take place with those affected.
This article is part of a series of in depth looks at different elements of the Employment Rights Bill. For more articles in the series, see our full range of commentary here.