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 these 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?
In its original form the Bill was going to remove the reference to "one establishment", so the right to collective consultation would have been determined by the number of employees impacted across the business rather than taking the current "local unit" approach where individual workplaces are looked at.
In its amended form the Bill states that collective consultation will be required if there are 20 or more redundancies at one establishment but also where a threshold number of redundancies are proposed at more than one establishment (the new threshold). The details of the new threshold will be set out in further regulations, but this is likely to be based on redundancies across the employing entity as a whole and could be a specified number of employees, a specified percentage of employees, or a number that is the higher or lower of two or more numbers.
The Bill also states that in carrying out collective consultation, the employer does not need to consult all employee representatives together or try to reach the same agreement with all of the representatives. This addresses a concern raised during last Autumn's consultation on collective redundancies that the Bill pre-amendment would have required all representatives to be brought together and consulted as a group over unconnected redundancies through the business.
The October consultation response
As a result of the 'Consultation on strengthening remedies against abuse of rules on collective redundancy and fire and rehire', the government has amended the Bill to increase the cap on protective awards in collective redundancy situations from 90 days to 180 days. If employee representatives successfully challenge the collective consultation regime in the tribunal it will be able to award compensation of up to 180 days per affected employee.
The government has confirmed that it will issue further best practice for employers of all sizes to follow when fulfilling their collective redundancy obligations.
The proposal that interim relief should be available in claims for protective awards and/or claims for unfair dismissal on grounds of fire and rehire has been dropped.
As a reminder, as of 20 January 2025, employers need to follow the Code of Practice on Dismissal and Re-engagement. If you don't a tribunal may apply an uplift of 25% to a protective award if it considers the failure to comply with the Code to be unreasonable, and it considers it just and equitable in all the circumstances to do so. In this situation an employer who has failed to comply with its collective consultation obligations will be facing a significant liability.
And there's more consultation on the horizon…
The government 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.
In the meantime we await the regulations setting out the extent of the new threshold, and the government guidance for employers on fulfilling their collective consultation obligations.
Practical points
There are a few key points to bear in mind in relation to these reforms:
- We do not have details yet of the new threshold, but it will impact on employers who operate from more than one site. It means that more redundancies are likely to fall within the collective consultation regime going forwards.
- 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 now that the protective award is increasing to a maximum of 180 days' pay.
- 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.
