In a Nutshell
What’s it all about? The recent proposed closure of the Redcar steel works, with the potential loss of 1,700 jobs has brought into focus obligations employers have towards employees in these large scale redundancy situations.
Why should you care? Employers have a statutory duty to consult with appropriate employee representatives when proposing to dismiss 20 or more employees at one establishment within a period of 90 days or less. Failure to comply with this duty can lead to awards of up to 13 weeks’ pay per employee.
What do you need to do now? If your business is contemplating redundancies of 20 or more employees, then these obligations must be at the forefront of your thinking and, as discussed below, the timing of the consultation is key to avoiding potential liability.
Get in touch: If you would like to speak to someone about the issues raised, please call contact Rory Byrom or find out more on our employment law page.
The full story
The recent decision of E Ivor Hughes Educational Foundation v Morris highlights how important it is for a business to abide by statutory collective redundancy duties when contemplating significant numbers of redundancies.
This statutory duty is triggered when an employer is proposing to dismiss 20 or more employees at one establishment within a period of 90 days or less. Accordingly, the employer must inform and consult the appropriate representatives of the affected employees. This process must begin in good time before the dismissals occur, e.g. if dismissing between 20 and 99 employees the minimum consultation period is 30 days. For over 100 employees, this minimum period is 45 days. Where this duty is breached, an Employment Tribunal may make a protective award to the relevant employees. As shown in this case, failing to comply with these duties may prove costly.
The Morris case concerned a secondary school which was previously operated by E Ivor Hughes Educational Foundation. In February 2013, due to the declining numbers of children enrolling at the school, the school governors took the decision that if the situation did not improve the school would need to close. In April 2013, the governors met again and decided to close the school and the employees were later informed of their forthcoming dismissal. Consequently, 24 employees raised an action against the Education Foundation claiming it had not observed its statutory duties by failing to carry out the necessary collective redundancy consultations. The matter was then brought before the Employment Appeal Tribunal (EAT).
When is the requirement to begin collective redundancy consultations triggered?
The EAT held that during the first school governors meeting in February the decision had clearly been made that if the number of pupils enrolled did not improve then continuing to operate the school would no longer be economically viable. Redundancy preparations should have been taken at this point as there was a "fixed, clear, albeit provisional intention" shown by the school governors and a "strategic decision” had been taken, which should have compelled the Education Foundation to contemplate or plan for collective redundancies if the situation did not improve. There is some suggestion from previous case law that collective consultation must begin even before this strategic decision is taken, but the EAT did not consider this further, rather unhelpfully.
As a consequence of failing to follow the appropriate consultation procedures, the EAT upheld tribunal’s decision to make the maximum protective award of 90 days' gross pay for each dismissed employee.
‘Special circumstances’ exemptions do not include ignorance of the law
There is a limited statutory defence, called the “special circumstances” defence, for instances of failure to inform and consult where an employer can successfully prove that is was not reasonably practicable for it to comply with its legal obligations. In Morris, the Education Foundation had tried to argue that they were unaware of their legal obligation to consult. Additionally, if they had been aware of their legal duty they could not have complied with it because if the redundancy consultation procedure was leaked, parents would lose confidence in the school resulting in certain closure. The EAT held that only issues present at the time of deciding whether or not to carry out the appropriate statutory redundancy procedures could be relied upon. Special circumstances could not be identified with hindsight.
Get in touch
If contemplating a large number of redundancies an employer should have regard to their duties if the collective redundancy rules are triggered. The attempted defence by the Education Foundation by arguing that they had a lack of knowledge of the law was overwhelmingly rejected. The EAT said that this ignorance of the law arose from a ‘reckless failure’ to seek legal advice. Accordingly, if you or your business has concerns about your legal obligations with regards to employee redundancies, please contact a member of our employment law team who will be happy to help you through what can be a complicated and difficult process.
If you would like to speak to someone about the issues raised, please get in touch.