The Employment Rights Bill (the Bill) ushers in significant change when it comes to the law surrounding collective redundancies.
The current position
If an employer is proposing to make 20 or more employees redundant at one establishment within a period of 90 days or less then it must comply with the collective consultation obligations set out in section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 i.e. it must inform and consult appropriate representatives of the affected employees in good time and at least:
- 30 days before the first dismissal for 20 to 99 proposed redundancies; or.
- 45 days before the first dismissal for 100 or more proposed redundancies.
Failure to comply with collective consultation obligations can result in claims for a "protective award" of up to 90 days uncapped pay for each affected employee.
Case law has established that the "local unit" approach is taken for collective redundancy purposes, so the unit or entity to which affected employees are assigned, rather than looking at the entire business.
What's changing?
The Bill removes the reference to "one establishment", so the collective consultation regime will apply when 20 or more employees are impacted across the entire business rather than just in one workplace. This means that employers will have to look at their business as a whole (where their business encompasses multiple sites) in order to determine whether they will be under an obligation to carry out collective consultation.
The government's impact assessment on strengthening collective redundancy rights notes that the reforms are intended to tackle situations where employers with multiple sites have been able to avoid collective consultation and notification obligations (filing Form HR1) by making fewer than 20 employees redundant at each individual establishment, even if the total number of redundancies across the business is significantly higher. The impact assessment reasons that this "fails to adequately protect employees' rights during large-scale redundancies".
The government's consultation
The government issued a 'Consultation on strengthening remedies against abuse of rules on collective redundancy and fire and rehire', on 21 October 2024 (it closes on 2 December 2024). It is seeking views on:
- increasing the protective award from 90 to 180 days, or
- removing the cap on the protective award entirely and leaving it to the employment tribunal's discretion to decide on the employer's penalty.
The intention is that employment tribunals will still retain discretion as to the length of the protected award period under either option, based on what the employment tribunal determines to be just and equitable in all the circumstances having regard to the seriousness of the employer's failure to comply. This means that minor failures to follow the rules, or cases where there are genuinely good reasons for not being able to comply, are unlikely to attract severe sanction.
The government is not proposing to apply an increased maximum period for calculating a protective award to insolvent firms. Where a company is insolvent the Insolvency Service will pay the protective award which is capped at 8 weeks' pay.
The consultation is also seeking views on whether interim relief should be available to employees who bring claims for the protective award to "ensure that they are no worse off pending the hearing" as well as to "further disincentivise employers from making a calculated decision to 'buy out' employees from their right to be consulted on the proposed redundancies".
Interim relief is a remedy which is currently available to employees for certain types of unfair dismissal claim. It is designed to ensure the preservation of the status quo pending the hearing of the unfair dismissal complaint. An employee will have to satisfy an employment tribunal that there are likely to succeed at hearing in showing that they were dismissed for the protected reason. The employment tribunal will then issue an order for the employer to either re-instate or re-engage the employee pending the final hearing; or, if the employer is unwilling to re-employ them, to continue to pay the employee their salary and benefits until the full hearing, or the settlement of their case.
And there's more consultation on the horizon…
The government has said it intends to gather further views on strengthening the collective redundancy framework in 2025. This will include consulting on increasing the collective consultation period from 45 to 90 days where 100 or more redundancies are proposed.
Practical points
There are a few key points to bear in mind in relation to these reforms:
- More redundancies are likely to fall within the collective consultation regime going forwards which will place an additional burden on employers, as well as impacting on timescales.
- You will need to give thought as to how you will handle redundancies across multiple sites.
- It will be important to comply with collective consultation obligations as a failure to do so will potentially be very expensive.
- If you have an employee forum, check their terms of reference to see if it covers collective consultation. If not, then consider including it (although an employer would need to make sure that it is representative of the affected employees at the time). If you don’t have an employee forum, think about putting one in place.
