Collective Redundancy Consultation During Lockdown: A Note for Employers
- A clear consequence of the current pandemic is that many employers are going to have to consider whether or not to make job cuts to their current employee base.
- With the Coronavirus Job Retention Scheme (CJRS) having been extended until 31 October 2020, we hope that many jobs will be saved but we can’t escape the fact that the CJRS is being phased out and so some job losses are inevitable.
- In this note, we focus on larger scale redundancy exercises (otherwise known as “collective redundancy exercises”), which brings section 188 of the Trade Union and Labour Relations (Consolidation) Act (TULRCA) into play. However, some of the points we cover (in particular, the practical tips for holding remote consultations and the rate of notice pay for those on furlough) will also be relevant to smaller scale redundancy exercises as well.
First, let’s recap on the basics.
What does TULCRA say about collective redundancies?
- Section 188(1) of TULRCA states that an employer has an obligation to consult collectively if it "is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less".
- The duty is restricted to proposals to dismiss, requiring a termination of a contract of employment. For these purposes, employees will be dismissed “as redundant” if the reason for the proposed dismissal is not related to the individual employees themselves. The definition is, therefore, much wider than that used for statutory redundancy pay purposes.
- The proposal can be less than a “decision” but should be more than a mere “contemplation”. However, an employer may "propose" redundancies even though alternatives to redundancy are also being considered.
What duties do employers have and what process must they follow?
- When proposing to dismiss as redundant 20 or more employees at one establishment over a 90-day period, the law provides that the employer must:
- Inform and consult with “appropriate representatives” of the affected employees (being the representatives of any recognised trade union or other elected employee representatives if no trade union is recognised in respect of the employees in question).
- Notify the Department for Business, Energy and Industrial Strategy via an HR1 Form.
- Collective consultations must begin in good time to allow the relevant discussions to take place. ‘Good time’ is dependent on the scale of the proposed redundancies. Where there are between 20 and 99 redundancies proposed, consultation must begin at least 30 days before the first dismissal takes effect. For 100 or more redundancies, the minimum period of consultation increases to 45 days. Consultation must have concluded before notices to terminate are given.
- Consultation begins with the provision of information on the proposals to representatives. The information that must be provided to the representatives is contained in s.188(4) TULRCA and includes the reasons for the proposals, the numbers and descriptions of employees and the proposed methods of selection, dismissal and calculation of redundancy payments.
- Consultations must be undertaken with a view to reaching agreement on matters such as ways to avoid the dismissals, reducing the number of dismissals and mitigating the consequences (s.188(2) TULRCA). The furloughing of the maximum number of employees for the maximum length of time may be viewed as sensible means of avoiding the dismissals or reducing their consequences.
What risks must employers be aware of?
- An employer’s failure to comply with any of the rules on collective consultation can lead to a protective award being made by an employment tribunal.
- The maximum protective award is up to 90 days’ gross pay for each employee affected by the proposed dismissals or by measures taken in connection with them. The statutory cap on a week’s pay does not apply and, therefore, the sums can be significant. However, the remedy is designed to be punitive rather than compensatory and the maximum award can be reduced where there are mitigating circumstances.
- In addition to collective consultation, affected employees should also be consulted with on an individual basis, to ensure any dismissal is fair, under ordinary unfair dismissal rules. Note only employees with 2+ years’ service have ordinary unfair dismissal rights and a right to a statutory redundancy payment.
- All employees (whatever their length of service) must be paid notice pay - see further below for the rate of notice pay for those on furlough.
During this current pandemic, it is likely to not be safe, practicable or at all possible for employers to conduct collective consultations face to face. The question, therefore, that employers will need to consider is can a legally compliant consultation exercise, pursuant to s.188, be conducted in the current unprecedented circumstances?
Thankfully, there is no legal obligation to consult face to face (see ACAS: Manage Staff Redundancies).
In practical terms, employers may feel it will be extremely difficult to consult in a legally compliant way with their employees as they may either be in lockdown and not working, or working remotely from home. Further, employers will probably need to grapple with employees on furlough leave.
Irrespective of whether the employees that are proposed to be made redundant are at their place of work, working from home or on furlough leave, employers must ensure that they take every step to ensure that the process is fair in the circumstances.
Redundancy consultations will still need to be arranged and carried out remotely; for example, via video conference calls using a platform such as Zoom, Microsoft Teams or Skype.
A key duty to keep in mind is that which is contained within s.188(5A) TULRCA, by which the employer must allow appropriate representatives “access” to the affected employees and other appropriate facilities. To what extent can this be met where the employees can only be contacted by electronic means and whether ‘appropriate facilities’ may extend to electronic means of communication?
We suggest that there are a number of practical issues that an employer needs to consider before, and during, the remote consultation:
- Consider any impacts on the timeframe for the redundancy consultation period that the end of the furlough scheme on 31 October 2020 may have; for example, if an employer wants to make the most of the CJRS then they need to start collective consultation on 16 September 2020 at the very latest where they are proposing to dismiss as redundant 100+ employees from one establishment over a 90-day period or less, and on 1 October 2020 at the very latest where they are proposing to dismiss as redundant 20-99 employees from one establishment over a 90-day period or less;
- Consider the effect that the current circumstances may have on the identification and appointment of appropriate representatives - there may be practical difficulties especially where there is no recognised trade union or existing staff representatives. However, note that the Government has confirmed in their step by step guide that employees who are union or non-union representatives may undertake duties for the purpose of representation of other employees or workers and that in undertaking those duties they won’t be classed as “working”;
- Consider a preparatory/first meeting between the employer and the appropriate representatives - this will facilitate a discussion over how the collective consultation will be operated virtually/remotely;
- Run a test meeting to ensure all parties have sufficient technology, that is working correctly, so that all delegates can be seen/heard;
- Allocate extra time for each consultation conducted remotely to allow for any logistical issues that may (likely) arise; and
- Agree a meeting protocol - this will enable collective consultation meetings to run efficiently, an example of which is all delegates muting their microphones whilst others are speaking; and/or an agenda being circulated prior to any meeting.
Remember that all practical issues in regards to a remote/virtual collective consultation will vary from employer to employer, and, therefore it is important to discuss the process/method in which it will be conducted with the appropriate representative in an open and fair manner to ensure a mutual understanding. This will enable the collective consultation to work as best as it can in the current circumstances.
As many businesses/employers will have only have run collective consultations on a face to face basis, other considerations need to be taken into account when running remote/virtual conferences:
- Will employers have to provide secure conferencing facilities for meetings with the appropriate representatives?
- How will meetings between the appropriate representatives themselves, in preparation for consultation with the employer, be facilitated?
- How will the costs incurred by all parties in relation to video-conferencing/telephone calls be attributed?
- Will all employees have the appropriate technical knowledge to be able to use the video conferencing software?
- Will all employees have appropriate access to the relevant technology? Is the employer able to facilitate video and audio calls simultaneously?
- Will either party be relying on documents and/or presentation slides during each virtual meeting? If so, agreements between the parties will need to be made prior in regards to documents that are confidential, and those that can be circulated openly.
- Is screen sharing a possibility?
As a cautionary note, many virtual/online conferencing software allows participants to record meetings without other the participant’s knowledge. Therefore, the assumption that all conversations are confidential may no longer be viable. Of course, employers and the appropriate representatives can agree that any meeting would be recorded and then employees covered by the consultation could watch the meeting itself.
Furloughed employees contemplated for redundancy
- The Government’s guidance note for employees states that ‘your employer can still make you redundant while you’re on furlough or afterwards’. Further to this, the Government’s guidance note for employers states ‘when the government ends the scheme [employers] must make a decision, depending on [their] circumstances, as to whether employees can return to their duties [and] if not, it may be necessary to consider termination of employment (redundancy)’.
- Although it appears that employers can make furloughed employees redundant, it is crucial to remember that furloughed employees still have the same employment rights and protection from unfair dismissal or discrimination.
- Employers should be cautious to select employees for redundancy purely on the basis that they have been furloughed. This may prove problematic for a number of reasons:
- Firstly, whether being on furlough would be a fair basis for redundancy would depend on the process and criteria used to select those employees for furlough leave. To be fair, the selection must involve the fair application of objective selection criteria to a reasonably constituted pool of employees and must not be directly or discriminatory in any way;
- Secondly, if staff have been furloughed because of caring responsibilities or as a shield for health reasons, the selection of these employees for redundancy could constitute disability discrimination. It will be important for employers to ensure that these employees are not placed at a greater risk of redundancy simply because they have been furloughed; and
- Thirdly, making furloughed employees redundant when they can remain on furlough leave may be deemed unfair depending on the circumstances. This would depend on whether leaving the employees on furlough until the scheme comes to an end might reasonably have prevented the redundancies from being required or be seen as a reasonable way of mitigating the consequences (by delaying the redundancy).
- It is, therefore, imperative that employers ensure that redundancy dismissals are effected only where:
- There is a genuine redundancy situation at that time; and
- They have followed a fair redundancy procedure in terms of both selection criteria and consultation.
Appropriate representatives’ refusal to participate in remote consultations
- There is a chance that the appropriate representatives may refuse to participate in any virtual/remote consultations proposed by the employer.
- As set above, any failure on the part of the employer to conduct proper consultations may lead to claims of unfair dismissal and / or the awarding of a protective award.
- If this situation arises, there is no denying that there is a risk that an employer may suffer consequences as a result. This is a grey area at the moment and the best approach in such circumstances would be to show that the employer took every available step to ensure that the process was as fair as possible in all the circumstances.
- The steps that an employer can take in such circumstances (further to those set out above) include the following:
- Attempting to resolve any issues with the appropriate representatives to procure their involvement in the consultations;
- Ensuring that the appropriate representatives are invited and given access to the remote consultations even if they do not intend to attend;
- Having a detailed note taken of each remote consultation containing all of the points and proposals discussed in the consultations and any questions that would have been raised to the representatives;
- Sending the note of each consultation to the appropriate representatives following the conclusion of the consultation; and
- Requesting repeatedly the involvement of the appropriate representatives throughout the period of consultation.
The Government’s guidance makes clear that employers can’t claim for reimbursement of “redundancy payments” (which we assume should be given its ordinary meaning- a statutory redundancy payment), but it is completely silent on what happens about notice pay. The majority of people are working on the basis that employers can use the CJRS grant towards notice pay so long as the period of notice fits within the remaining period of the CJRS (but not towards any payments in lieu of notice, since employees would stop being on furlough as soon as their employment ends).
The more complicated question, for which there is no definitive answer, is what rate should notice pay be paid at- the reduced furlough rate of pay, or their normal 100% rate of pay?
- Some commentators are of the view that an employee will only have agreed to furlough on reduced pay because they were being told it was the main way to save their job (hence the title, the Coronavirus Job Retention Scheme). As a result, they think that it would be disingenuous to now give them notice of termination on the reduced furlough rate of pay. (View 1)
- Others are of the view that if an employee agreed to reduced pay during a period of furlough, they were agreeing to a change in their terms and conditions of employment for the full furlough period and so if, unfortunately, they are being given notice of termination whilst on furlough (which, as we have seen, the CJRS envisages) that would be on their furlough rate of pay (so long as their notice period fits within the period of the CJRS that is left- if their notice period runs for longer, then it is accepted that the overhang would be on 100% pay). (View 2)
It doesn’t stop there, unfortunately, because there is an argument, if you study the Employment Rights Act 1996 (ERA) more closely, that it may actually depend on the length of an employee’s contractual notice period compared to the minimum statutory period of notice that they are due (this is similar to the position regarding notice for employees who are on long term sickness absence). It is sometimes called the “Statutory Notice Trap”.
These ERA provisions do not apply to those whose contractual notice periods are at least one week longer than what they would be due under statute (e.g. someone with 8 years’ service and, therefore, with a minimum statutory notice entitlement of 8 weeks, who has a 3 month contractual notice period) - for them, employers need to decide whether to go with View 1 or View 2 above. For what it is worth, we are finding that most employers we speak to, prefer View 2.
However, where an employee’s notice period is the same as (or less than one week longer than) the statutory notice period they would be due (e.g. someone with 8 years’ service who has a contractual 8 week notice period), then these ERA provisions do apply. As an aside, where they apply, the employee must be “ready and willing to work”- we are of the view that that will be satisfied even if employees are on furlough (since they would work if they could etc.).
So what rate should their notice pay be? The answer depends on whether or not they have normal working hours:
- If they have normal working hours and their pay does not vary with the hours worked, then they would be due notice pay at their normal 100% pay rate;
- If they have normal working hours but their pay does vary with hours worked, they should be paid notice pay based on an average of their previous 12 weeks’ pay (which would mean that if they have been on furlough for 12 weeks, the average would be the reduced furlough rate, but if they have only been on furlough for, say, 6 weeks, then their notice pay will be an average of 6 weeks at the reduced furlough rate of pay and 6 weeks at the immediately prior ‘full’ rate of pay).
- If they do not have normal working hours then their notice pay should also be calculated using an average (as above).
It is complicated, isn’t it! The safest route is, therefore, to pay notice at their normal 100% rate of pay (which would require employers to top up the money they receive under the CJRS) but if an employer is cash-poor, then there may be an argument/ view that notice pay can be paid at the reduced furlough rate.
If employers get it wrong, then they may face claims for unlawful deduction of wages but they can then choose to settle them at a later date or pay what’s due after a tribunal hearing. What needs to be remembered, however, is that, if an employer breaches an employee’s contract (for example, by failing to pay the correct notice pay), then the employment contact falls away (which would mean that any clauses that survive its termination- such as post termination restrictions) would also fall away). Do seek advice if you are unsure.
Making people redundant in “normal times” is difficult enough. Doing it over a video conference call takes it on to another level. The most crucial point for employers is to act reasonably at all times; that may mean the process needs to take slightly longer, so employees can absorb the information they are being given and/or work out how the technology works. That said, whilst video may create new problems, it is the best replacement for a meeting in person.
Whilst there are still areas of uncertainty, we hope that this note is helpful. Please contact a member of the Employment team if you require specific legal advice on your situation.
The law is constantly changing and the position set out in this note may not be current. You should not rely on this note as a comprehensive statement of the law. Please contact us if you require specific legal advice on your situation.
© Knights plc 11 June 2020