The Employment Appeal Tribunal has in a recent case found that the obligation to inform and consult with employees in relation to collective redundancies is likely to arise at a very early stage in an employer’s restructuring plans.
Where an employer is proposing to make 20 or more employees redundant, within a period of 90 days or less, it must consult with appropriate representatives of the affected employees (section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992). In addition to specific obligations to consult at least 90 days before the first of the dismissals takes effect (if more than 100 redundancies are proposed) or 30 days before (if between 20 and 100 redundancies are proposed), there is also a general obligation to begin consultations "in good time". Consultation must be meaningful and must include consultation about ways of avoiding dismissals and reducing the number of employees to be dismissed, as well as mitigating the consequences of the dismissals. Failure to consult will result in liability to pay a protective award of up to 90 days pay to every affected employee.
In Cranwick Country Food plc v GMB the employer operated two sausage factories. From mid-2003 it began looking at consolidating the two operations at one new site. The consolidation of production was likely to result in about 85 redundancies.
The first meeting between the employer and the GMB union did not take place until 18 February 2004 and the workforce was not told about the proposed redundancies until 20 and 21 February 2004. Some limited consultation followed about ways of mitigating the consequences of the redundancies but there was no meaningful consultation on ways of avoiding the dismissals or reducing their number.
Before this, there had been a fair amount of preparation by the Company. During late 2003, arrangements were made to purchase the new site and planning permission was sought. Then, on 5 January 2004, the board of the company was presented with details of the likely savings on costs from consolidating production and the CEO's plan to transfer production over the coming months.
The EAT found that consultation should have begun on 5 January 2004, when the employer's board of directors first made the decision to consolidate production since at that point the employer was in a position to know the numbers of likely redundancies and could therefore be deemed to have been "proposing to dismiss" then. The employer had therefore failed to consult contrary to s.188 TULR(C)A and was ordered to pay a protective award of 70 days pay to each affected employee.
This case demonstrates that where collective redundancies are a possibility, the obligation to consult is likely to arise at a very early stage. The obligation is to consult with trade unions or employee representatives who are elected or appointed for the purposes of the consultation. In non-unionised workforces, this may create difficulties, since there will be no pre-existing employee representatives when the obligation to consult arises. Employees will therefore need to be informed immediately and arrangements made for the election of representatives. If this happens at a very early stage, possibly before the employer's plans are fully finalised, it is likely to be highly disruptive to the workforce and may create unnecessary unrest and instability. However, the potential consequences of failing to consult properly are likely to be very costly.
One way for employers with non-unionised workforces to be ready for consultation at an early stage without the need to arrange elections of employee representatives for each consultation exercise is to set up an informing and consulting body (ICB) under the Information and Consultation of Employees Regulations. This enables the workforce to elect permanent employee representatives who have authority to enter into consultations with the employer for the purposes of section 188 of TULR(C)A. This would avoid the need for repeat elections and the disruption of the workforce that that would entail.
If you would like any further information or assistance on any of these issues, please contact Ian Hunter, Tel: 020 7415 6140 or email: firstname.lastname@example.org or Warren Wayne, Tel: 020 7905 6230 or email: email@example.com