Redundancy: consultation checklist

Matthew Briggs and Helen Dallimore of Osborne Clarke continue a series of articles on redundancy with a consultation checklist.

1. Consider whether there is a redundancy situation.

There is a genuine redundancy situation where:

  • there is a closure of the business in which the employee is employed;
  • there is a closure of the place of business where the employee is employed; or
  • there is a reduced requirement for employees to carry out work of a particular kind.

2. Establish the number of proposed dismissals.

If there are 20 or more proposed dismissals - If there is a proposal to dismiss as redundant 20 or more employees at one establishment, within a period of 90 days, the collective consultation obligations are triggered (see point 5). Dismissal for redundancy in this context covers any reason for dismissal that does not relate to the individual employee and includes changing terms and conditions through termination and re-engagement, and the expiry of fixed term contracts. Employees who apply and are accepted for voluntary redundancy should also be included when calculating the number of proposed dismissals (Optare Group Ltd v Transport and General Workers' Union [2007] IRLR 931 EAT).

Failure to comply with the collective consultation obligations may result in the employer being ordered to pay a protective award of up to 90 days' actual pay to each affected employee. This is a punitive rather than compensatory award (ie it is not calculated by reference to loss) and the presumption is that it will be 90 days' pay (Susie Radin Ltd v GMB and others [2004] IRLR 400 CA). Hutchins v Permacell Finesse Ltd (in administration) EAT/0350/07 established that even where the minimum period of consultation is 30 days the presumption of a 90-day protective award still applies.

If there are fewer than 20 proposed dismissals - The statutory dismissal and disciplinary procedure must be followed (see points 7-11).

In all cases - To avoid successful claims of unfair dismissal, a fair procedure must be followed. This involves the steps set out in points 3-11 (with the exception of point 5, which relates to collective consultation).

3. Establish a pool of employees and criteria for selection.

  • Consider the appropriate pool of employees for potential redundancy.
  • Establish a proposed set of objective selection criteria.
  • Put together a list of alternative vacancies.

4. Have a meeting.

To manage the redundancy process from an employee relations perspective, and depending on the numbers involved, it is a good idea to hold a meeting with all employees who might be made redundant, to discuss the reasons for the proposed redundancies, the numbers affected, the proposed selection criteria, the number of proposed redundancies, the time scale, and any possible alternatives to redundancy and to ask for suggestions to avoid redundancies. It should be made clear that, at this stage, redundancy is only a proposal and any input from employees, regarding alternatives, is welcome. This information should be confirmed in a letter and the selection criteria given to the employees. If the collective consultation obligations are triggered the steps set out in point 5 should be followed. If the collective consultation obligations are not triggered the steps in point 6 should be followed next.

5. Comply with the collective consultation requirements if they apply.

5.1 Identify the affected employees and appropriate representatives.

It is necessary to identify the affected employees and their appropriate representatives as it the representatives of these individuals who must be consulted. Affected employees are those who may be "affected by the proposed dismissals or [who] may be affected by measures taken in connection with those dismissals" and are not restricted to those who are at immediate risk of redundancy (s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A)). Where any of the affected employees are represented by a recognised trade union the trade union representatives must be consulted. In other cases, the employer may consult with:

  • representatives directly elected by the affected employees; or
  • an appropriate standing body that has authority from the employees to receive information and be consulted about the proposed dismissals (for example a works council or other employee representative body).

5.2 If necessary, invite employees to elect appropriate representatives.

Where it is necessary for employees to elect representatives the employer must comply with the statutory rules in relation to those elections. In particular, it must:

  • make such arrangements as are reasonably practicable to ensure the election is fair;
  • determine the number of representatives to ensure that sufficient numbers are in place to take account of the interests of the affected employees;
  • consider whether a constituency approach (ie a representative for each class of employee) or representation as a whole suits the nature of the business;
  • determine the length of office of the representatives and ensure that it is long enough to cover the consultation process.

Representatives must be affected employees on the date of election and no affected employee can unreasonably be excluded from standing for election. All affected employees are entitled to vote and can vote for as many candidates as there are representatives. So far as reasonably practicable, voting should also be confidential.

If affected employees fail to elect representatives within a reasonable time the information set out in point 5.4 must be provided to individual employees.

5.3 Begin consultation "in good time".

Under s.188 of TULR(C)A consultation must begin "in good time". The obligation starts as soon as there is a proposal to dismiss 20 or more employees at one establishment. Consultation must start before any final decisions are made. This is to ensure that it can be conducted with "a view to reaching agreement" as required by the legislation. The minimum consultation periods are as follows:

  • where the employer is proposing to dismiss 100 or more employees in a 90-day period, consultation must begin at least 90 days before the first dismissal takes effect; and
  • where the employer is proposing to dismiss between 20 and 99 employees in a 90-day period, consultation must begin at least 30 days before the first dismissal takes effect.

5.4 Provide the required information at the start of consultation.

The information that should be provided to appropriate representatives, in writing, as a minimum is:

  • the reasons for the proposed dismissals;
  • the numbers and descriptions of employees proposed to be made redundant;
  • the total number of such employees at the particular establishment;
  • the proposed method of selecting employees;
  • the proposed method of carrying out the dismissals, including any procedure that has been agreed (eg contractual procedures) and the period over which dismissals will take place;
  • the proposed method of calculating any redundancy payments in excess of statutory redundancy pay.

Failure to provide representatives with sufficient information to understand the proposed measures, their effect and the reasons for them may be a breach of the requirements.

5.5 Consult with appropriate representatives.

It is mandatory to consult with appropriate representatives about ways of:

  • avoiding the dismissals;
  • reducing the number of employees to be dismissed; and
  • mitigating the consequences of dismissals.

Following UK Coal Mining Ltd v National Union of Mineworkers (Northumberland Area) and another [2008] IRLR 4 EAT it is now clear that an employer must consult about the business reasons for redundancies as part of the obligation to consult about ways in which the redundancies can be avoided.

5.6 Remember that, unless there are special circumstances making it not reasonably practicable to comply, the collective consultation obligations must be met.

The burden of proving that there are special circumstances is on the employer. Even if there are special circumstances it is still necessary to take all such reasonably practicable steps to comply with the consultation requirements.

5.8 Consider additional obligations (if any) under the Information and Consultation of Employees Regulations 2004.

If there are any other agreements with employee representative bodies, these should be checked to determine whether there are additional consultation obligations. In particular, the standard information and consultation provisions for employee forums set up under the 2004 Regulations require the employer to consult over "decisions likely to lead to substantial changes in work organisation or in contractual relations" (reg.20(1)(c)). However, where s.188 of TULR(C)A is triggered, the employer does not need to consult with information and consultation representatives under the 2004 Regulations, provided that it has notified those representatives, in writing, that it will be complying with its duties under s.188 of TULR(C)A.

5.9. Notify the Secretary of State.

Where the collective consultation requirements are triggered, the notification requirements will also be triggered. Written notification (usually on form HR1) must be received by the Secretary of State for the Department for Business, Enterprise and Regulatory Reform:

  • at least 30 days before the first dismissal takes effect where the employer proposes to dismiss 20 to 99 employees at one establishment within a 90-day period; and
  • at least 90 days before the first dismissal takes effect where the employer proposes to dismiss 100 or more employees at one establishment within a 90-day period.

The notification must include the identity of any employee representatives to be consulted and the date on which such consultation began. It should also be copied to the appropriate representatives.

Failure to notify the Secretary of State is a criminal offence.

6. Provisionally select employees for redundancy.

Using the agreed selection criteria, score each potentially redundant employee. Ensure that at least two line managers conduct the scoring to help ensure scores are objective.

7. Invite employees to a meeting (step one of the statutory dismissal and disciplinary procedure).

Where the collective consultation obligations apply, there is no legal requirement to comply with the statutory dismissal and disciplinary procedure. However, it is good practice to do so. This will also assist employers in establishing that they have followed a fair procedure for the purposes of any unfair dismissal claims that may be brought by employees.

Each employee provisionally selected for redundancy should be written to and invited to a meeting to discuss the possible selection. The letter should:

  • make clear that the employee may be accompanied by a trade union representative or colleague;
  • set out the reasons for the redundancy situation and why the employee has been provisionally selected;
  • summarise the consultation that has been held with employees to date;
  • confirm that no final decision has been made and that a further meeting will take place if selection for redundancy is confirmed.

The employee should be given a reasonable amount of time to consider the information in the letter before the meeting is held.

8. Hold the first individual meeting.

A meeting will be necessary to show evidence of a fair procedure. This meeting may also form part of step two of the statutory dismissal and disciplinary procedure under which a meeting must take place. Scheduled meetings should be held with employees to:

  • consult with them regarding their scores against the selection criteria, the proposal to select them for redundancy, and the redundancy terms;
  • consider any comments from employees regarding their selection, particularly in relation to their scores;
  • discuss details of any alternative vacancies.

During the meeting an employee should be able to comment on and explain his or her case. This is a general requirement of the statutory dismissal and disciplinary procedure and forms part of step two of the procedure.

9. Follow up the meeting.

If applicable the following points should be considered:

  • any suggestions made to avoid redundancies (even where collective consultation has already taken place);
  • any representations made on scores;
  • whether any change in scores will result in different employees being provisionally selected.

Where a change in selected employees occurs, the relevant parts of the process should be repeated with those employees newly selected.

10. Hold a second individual meeting with employees to be made redundant and send dismissal letters.

Each employee should be invited to a further meeting, at which he or she can be accompanied by a trade union representative or colleague, and the following points are confirmed:

  • that he or she has been selected for redundancy;
  • the redundancy package;
  • that he or she has the right to take time off to seek alternative employment.

The meeting should be followed up by a letter confirming:

  • the dismissal by reason of redundancy;
  • the termination date;
  • the calculation of statutory redundancy pay and any other payments to be made; and
  • the employee's right of appeal.

11. Hold an appeal (step three of the statutory dismissal and disciplinary procedure).

An employee who appeals against the redundancy dismissal should be invited to a meeting at which the appeal is heard. At the meeting he or she must be allowed to be accompanied by a trade union representative or colleague. If possible, appeals should be heard by someone senior to the person who held earlier meetings. Following the appeal meeting, the employee should be written to and the outcome of the appeal confirmed. The fact that the decision is final should also be made clear.

Next week's article will be FAQs on redundancy and will be published on 28 April.

Matthew Briggs (matthew.briggs@osborneclarke.com) is an associate and Helen Dallimore (helen.dallimore@osborneclarke.com) a solicitor at Osborne Clarke.

Further information on Osborne Clarke can be accessed at www.osborneclarke.com.