Employment Update: Protective Award

13 February 2008

Where there is total failure to consult with no mitigating circumstances the protective award will be 90 days’ pay even in a case where the consultation period would only have been 30 days.

In Hutchins v Permacell Finesse Ltd, 77 employees had been made redundant when the employer failed financially. There had been a total failure on the employer’s part to consult with the workforce as required by the Trade Union and Labour Relations (Consolidation) Act 1992 and no mitigating circumstances.

The statutory requirement is that, where 20-100 employees are at risk of redundancy, the employer must consult at least 30 days prior to the redundancies taking effect. Where over 100 employees are concerned, the consultation period must start 90 days prior to the redundancies taking effect.

The protective award for failure to consult is fixed at a maximum of 90 days' actual pay per individual employee. Where the employer is insolvent (as in this case) the protective award is one of the payments guaranteed by the Secretary of State under the Employment Rights Act so the claimants still had a real interest in the amount awarded.

In Hutchins, the employment tribunal awarded the claimants 30 days' pay each based on the fact that they should have had a 30 day consultation period.

The EAT has now said that this was wrong. Although there are different consultation periods where different numbers of employees are at risk of redundancy, the protective award is calculated on the same basis for all and the guidelines set out in the Susie Radin case also apply to all cases.

Where there is a total failure to consult and no mitigating circumstances the protective award should be the maximum 90 days' pay per employee.

So the EAT has increased the award in this case from 30 to 90 days' pay each.

Point to note ­–

  • When carrying out a redundancy exercise, employers will be keen to keep expense and potential employee claims down to a minimum. One way in which this can be done is to ensure that there is proper consultation with the affected employees so that there is no risk of any claim for a protective award – which, if made, is payable to each affected employee and is calculated on the basis of their actual pay.