3. Rights to collective and individual consultation

An employer has a legal duty to consult employee representatives if it is proposing to make 20 or more redundancies. It should also consult individual employees, regardless of the number of redundancies. This Chapter sets out the legal obligations on redundancy consultation.

Collective consultation

The law on collective consultation is contained in Chapter II (section 188 onwards) of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). It imposes extensive obligations on an employer to consult representatives about proposed redundancies.

Under section 188 of TULRCA, an employer proposing to make 20 or more employees redundant at one establishment within a 90-day period is legally obliged to provide information to and consult with “appropriate” representatives of the “affected employees”. Even when those being made redundant are volunteers, there is still an obligation to consult. “Affected employees” include not only those who may be dismissed, but also any employee affected by the proposed dismissals, or who may be affected by “measures” taken in connection with the dismissals. The notification to reps that collective redundancies are proposed is often referred to as a “section 188 notice”.

Note that the definition of a “redundancy” for the purpose of collective consultation is wider than the definition used for individual redundancy dismissals discussed in Chapter 2. In the context of collective consultation, the law defines redundancy as dismissal “not for a reason related to the individual concerned”. This definition is important because it means there can still be a redundancy dismissal for the purposes of collective consultation where the same numbers of employees remain employed. There is no need for a reduction in the employer’s requirement for employees to carry out “work of a particular kind”. So, for example, there is a requirement to consult collectively where an employer decides to give notice to 20 or more employees to terminate their contracts whilst simultaneously offering to re-engage them on new terms and conditions.

Notification of collective redundancies to BIS

As well as consulting employee representatives, the employer has a legal obligation to notify the Secretary of State of the Department for Business, Innovation and Skills (BIS) of all proposed redundancies of 20 or more employees. This is done by completing an HR1 form and sending it to the Redundancy Payments Service, part of BIS. The form asks for information on why the redundancies are being proposed and on the number of staff, by occupational group, likely to be affected. The employer also has to set out the proposed selection and consultation procedure. There is an online version of the form at: www.insolvencydirect.bis.gov.uk/pdfs/rpforms/hr1.pdf.

If the number of proposed redundancies is 100 or more employees at one establishment, notification must be given to BIS at least 90 days before the first redundancy covered by the notice takes effect. If the number is between 20 and 99, the notification must be given at least 30 days before the first redundancy takes effect, and in any event before notice is given to terminate any contracts of employment. The employer must give a copy of this notification to employee reps. Failure to notify BIS of collective redundancies can lead to a conviction and a fine.

The extent of the statutory obligation to consult

The statutory obligation is to consult:

• in good time, about ways of:

• avoiding dismissals;

• reducing the number of employees to be dismissed; and

• mitigating the consequences of the dismissals.

This should form the basic agenda for any consultative meetings on redundancy. The law requires the employer to consult on each of the three headings. If it fails to do this, the consultation will be inadequate.

Consultation “in good time”

Consultation must take place “in good time”. There is no precise definition of what this means, but there are minimum requirements. If the number of proposed redundancies is 100 or more employees at one establishment, consultation must begin at least 90 days before the first redundancy takes effect. If the number is between 20 and 99, it must begin at least 30 days before the first redundancy takes effect. The crucial point is that consultation must take place when proposals are still at a formative stage, whilst unions can still strategically influence the outcome of any decision.

In any event, these are minimum requirements. The Department for Business Innovation and Skills (BIS) has produced guidance on collective redundancy consultation and notification, which spells out that: “Employers should consult beyond the 30 or 90 day minimum where the consultations are not yet complete” (2006: Redundancy Consultation and Notification URN 06/1965Y).

How early in the process must consultation begin?

This state of the law on this crucial issue is currently in a state of flux. However, the leading case is still UK Coal Mining Limited v National Union of Mineworkers (Northumberland Area) and Another [2008] ICR 163. In this case, which represents an important victory for trade unions, the EAT ruled that the obligation to consult collectively is triggered as soon as there is a clear (albeit provisional) proposal (for example, a proposal to close a plant) that would almost inevitably result in redundancies, as opposed to when a strategy, such as closure is merely “mooted as a possibility”:

The issue resurfaced in United States of America v Nolan [2011] IRLR 40:

It is unfortunately not clear from the Fujitsu decision whether the ECJ agrees with the EAT that the obligation to consult starts once the employer has made a clear, albeit provisional strategic decision which, if implemented, is likely to lead to redundancies (UK Coal Mining), or alternatively, that the consultation obligation is only triggered once the strategic decision (for example, to close a plant) has already been taken and the employer is proposing consequential redundancies. Because of this lack of clarity, the Court of Appeal has referred the USA v Nolan case to the ECJ. A decision is expected in late 2011 or early 2012. This will be an important decision for union negotiators.

The employer is not allowed to argue that consultation would have made “no difference” to the outcome

The law does not allow employers to argue that consultation would be futile or useless (Middlesbrough County Council v TGWU [2002] IRLR332). In this case, the local authority had already decided to make redundancies and it issued redundancy notices by letter, half an hour after meeting the unions. It was obvious the authority was not willing to consider any alternative. This was not genuine consultation.

What if administrators have been appointed?

Where a company is in financial difficulty and administrators have been appointed, the administrators are under the same statutory duty to inform and consult with employee representatives as the original employer.

However, the reality is often very different, and highly unsatisfactory, as was recently shown with the collapse of Jarvis Rail, with the loss of around 1,200 jobs and no consultation with unions.

Redundancy and TUPE

Where a business is sold as a going concern, the Transfer of Business (Protection of Employment) Regulations 2006 (TUPE) will be triggered. The Labour Research Department (LRD) has produced an updated guide to TUPE for trade unionists which addresses how TUPE works in the context of redundancy, including the impact of insolvency: TUPE — a guide for trade unionists.

What if redundancy is only one of the options?

An employer can still be “proposing redundancies” for the purposes of collective consultation if redundancy is only one of various options, as in the case of Scotch Premier Meats v Burns [2000] IRLR 639, where the employer was uncertain whether to make redundancies, or alternatively to sell the business.

Dismissing employees and offering to re-engage them on new reduced terms and conditions

One of the most disturbing features of the current economic downturn has been the growing use of the tactic of mass dismissal of staff whilst simultaneously offering them new contracts with worsened terms and conditions, serving a Section 188 Notice as a way of forcing through pay and other cuts. This is sometimes described by employers as the “nuclear option” because of the knock-on, long-term damage caused to employment relations.

It was confirmed in GMB v Man Truck and Bus UK Ltd EAT/971/99 [2000] IRLR 636, that the dismissal of employees and their re-engagement on new terms and conditions creates collective redundancy consultation rights, even though there is no proposed reduction in the number of employees.

In 2011, thousands of public sector employees have already faced this situation. Recent examples include Rhondda Cynon Taf Council (10,000 employees), Sheffield City Council (8,500), Birmingham City Council (26,000), Walsall Council (8,400), Croydon Council (4,000) London Fire Service (700) and Northumberland County Council (14,780) (Source: The Guardian, 7 July 2011). The GMB calculated that as of late April 2011, 171,709 posts were under threat or had already gone at 331 local authorities in England, Wales and Scotland (source: The Guardian 23 May 2011).

The risk taken by an employer who adopts this strategy is that of facing a large number of unfair dismissal claims. In a difficult economic climate employees often find themselves with no practical choice but to accept the new conditions. However, there have been examples of employees organising together to use the threat of tribunal proceedings to improve the terms offered.

In Slade & Others v TNT(UK)Limited (UKEAT/0113/11/DA), 470 employees at two depots of logistics giant TNT(UK) were asked to give up a contractual “sorting bonus” worth around 18% of their wages. TNT had suffered from the recession and had introduced cost cutting measures, including a wage freeze, closing regional hubs, slashing the sub-contractor rate, reducing the agency workforce and making over 300 redundancies. Negotiations were started with Unite, the recognised union, offering a lump sum to compensate the employees, but these failed to reach agreement and TNT terminated the contracts, coupled with immediate offers of re-engagement on the reduced terms but without the lump sum payment.

All the dismissed employees who were represented in the negotiations accepted the new terms but under protest and without prejudice to their right to bring claims for unfair dismissal. With the help of Acas conciliators, a deal was struck resulting in an improved lump sum payment, better than the terms originally offered in the negotiations leading to the termination of the contracts, and which was accepted by the majority of the employees.

In total, 183 employees rejected the deal and continued with their claims for unfair dismissal. These claims were for the most part unsuccessful. The tribunal was persuaded that TNT had a sound business need to introduce the reduced terms and had engaged in fair consultation before carrying out the dismissals. The employees appealed. The EAT agreed with the tribunal that the dismissals were due to a genuine need to restructure pay but the employees argued that the tribunal had placed insufficient emphasis on the hardship caused to employees by the pay-cut, suggesting that if TNT was financially able to pay a lump sum in compensation, then its decision to impose the new terms without a lump sum payment made the dismissals unfair. The EAT rejected this argument, finding that the extra lump sum was offered to avoid the cost and risk of litigation and that once negotiations had broken down, it was within the range of reasonable responses of an employer to impose the terms without additional payment.

This case illustrates how, in practice, an employer who is able to demonstrate a sound business need to reduce terms and conditions and who consults fairly, considering all the options, is likely to be able to defeat a tribunal claim for unfair dismissal. It is not necessary for the employer to demonstrate that cutting pay is the only way of saving the business (Garside and Laycock Limited v Booth (UKEAT/0003/11/CEA). As long as the employer acts reasonably in carrying out the pay cut, in particular by exploring all the alternatives in consultation, it is enough to be able to show that failure to carry out the pay cut is likely to have a serious impact on the business.

In Garside, Mr Booth was the only employee who held out against the pay cut and this contributed directly to the fairness of the decision to sack him. The EAT confirmed a reasonable employer could not be expected to continue to employ one (or a minority) of employees on better terms than others, simply because others have agreed to accept a pay cut. This illustrates the importance of acting collectively. In Garside, the EAT also made some helpful observations on the overall need for equity and “fair-dealing”by the employer, questioning for example, whether a pay cut would be fair when it fell only on non-management, as opposed to management staff.

There has also been some well-supported industrial action to fight these imposed pay cuts. For example, as this booklet goes to press, coordinated action is ongoing by 4,300 council employees, members of UNISON and Unite, against imposed pay cuts by Southampton County Council, across council services including refuse collection, street cleaning, parking, adult social care and children’s services.

Another high risk attached to the tactic of dismissal and re-engagement is that of a claim for a protective award for failure to consult adequately. The following case provides a good example:

This year proceedings are reported to have been issued by both UNISON and Unite against Southampton Council for failing to consult in relation to imposed pay cuts, although these are not expected to be heard until 2012.

Can the effect of notice and consultation under section 188 expire?

A notice given validly under section 188 of TULCRA cannot last forever. In Vauxhall Motors Limited v T&GWU [2006] IRLR 674, the EAT gave a hypothetical illustration: A company in financial difficulties gives notice to the union. Consultation begins, but a large new order comes in, removing the need for redundancies, so consultation ends. A year later, the new order has been filled and there is nothing to replace it. At this point, a fresh consultation round is needed. The original notice has expired.

However, the facts in the Vauxhall case itself were different and more complex:

Consultation must be “sufficient and meaningful”

In summary, tribunals will want to ensure that:

• consultation takes place when proposals are still at a formative stage;

• adequate information is provided to enable reps to put together their response;

• adequate time is given to respond; and

• a “conscientious consideration” is given by the employer to the employee reps’ response (R v British Coal Corporation ex p Price [1994] IRLR 72).

Consultation is unlikely to be “meaningful” unless the employer has properly explored all ideas reasonably suggested by the union for avoiding redundancies, reducing their number or mitigating their effects. These could include, for example: cost cutting elsewhere in the organisation, recruitment freezes, cuts to agency staff, temporary cuts to overtime and discretionary benefits, short-term salary freezes (which could be targeted progressively to protect lower earners), temporary flexible working arrangements, sabbaticals, unpaid leave, increased part-time work, home-working to reduce overhead and job shares. Failure to explore all reasonable ideas put forward during the consultation process will expose the employer to the risk of a protective award.

Where possible, any concessions made during consultation should be temporary and subject to a fixed review or cut-off point, so that the original terms can be reinstated (and some compensation mechanism built in, if realistically possible) when the upturn comes. Where salary freezes or pay-cuts are invoked, reps should negotiate a clear agreement that if redundancies later prove unavoidable, redundancy pay will be based on the original higher salary and benefits. If not, the default position under the law is likely to be that redundancy pay is calculated by reference to the lower wages/hours that were being paid at the dismissal date.

Information to be provided by the employer

For the purposes of consultation, the employer must provide adequate information. Specifically, section 188(4) of TULRCA requires the employer to provide the following information in writing to the appropriate representatives:

• the reasons for the redundancies;

• the numbers and description(s) of employees proposed to be made redundant;

• the total number of employees of any description;

• the proposed selection procedure;

• proposed method for carrying out redundancy dismissals, including timescale; and

• proposals for calculating redundancy pay, if this is to exceed the statutory minimum (see Chapter 6).

Lack of information does not justify a failure to consult

In Akavan etc v Fujitsu (Case 44/08 ECJ), the ECJ confirmed that the obligation to start consultation does not depend on the employer being able to supply reps with this statutory information. Instead, the wording of the Directive clearly envisages this information being provided during the consultation process rather than necessarily at the start (see also GMB and Amicus v Beloit Walmsley [2004] IRLR 18). However, a failure to supply information as soon as it is practically available to the employer is also likely to result in failure to consult “in good time” (R v British Coal ex parte Price [1994] IRLR 72)). “Meaningful” consultation demands an on-going commitment by the employer to share relevant information, as it becomes available, throughout the process.

Section 188(7) of TULRCA specifically states that a parent company’s failure to supply a subsidiary with information will not justify a failure to consult.

Whether information is adequate will depending on individual circumstances. The employer will not necessarily be required to disclose details of precise jobs and numbers, but more than just the content of the notification to the Department for Business Information and Skills (BIS) will usually be needed (MSF v GEC Ferranti [1994] IRLR 113).

What if the employer objects to sharing information because of confidentiality concerns?

Employers sometimes try to avoid consulting by arguing that this would create commercial problems. For example, if they are considering moving operations off-shore, they may not want to discuss issues with staff until after a deal has been concluded. But the rules (including Stock Exchange Rules) do not prevent employers giving commercially sensitive information to reps who are prepared to enter into confidentiality agreements for a specified period.

Consultation with a view to agreement

Consultation must be “with a view to reaching an agreement” (section 188(2) of TULRCA). According to the ECJ in Junk v Kuhnel ([2005] IRLR 310), this means that genuine consultation should be tantamount to a negotiation. This does not mean that at the end of the discussions, employers and reps must be in agreement with the proposed arrangements. Instead, it means they should carry out the talks in a spirit of seeking agreement. Acas recommends that the parties should take care not to polarise their positions (Acas Policy Discussion Paper:Collective consultation on redundancies).

Employers who make it clear from the outset that redundancy proposals will not change regardless what representations are made are likely to be liable for a protective award.

Timing of dismissal notices

An employer cannot give notice of redundancy before the consultation process has completed. This important principle was decided by the ECJ in the following case:

However, some employers’ advisors suggest that the decision in Junk does not always mean that notices of dismissal cannot be served until the end of the 90/30 day period, arguing that all that is required under the Directive is for consultation to be started “in good time”, with a view to reaching agreement and that as long as the consultation process has ended, either by reaching agreement with employee representatives, or by reaching a conclusion even if without agreement, then the employer can lawfully give notice during the 90/30 day period, to take effect at the end of this period.

This position is reflected in the BIS Guidance (2006: Redundancy Consultation and Notification URN 06/1965Y) which states:

“Redundancy notices can be issued only when the consultation has been completed, in other words, the consultation has either resulted in agreement with employee representatives, or has otherwise reached its conclusion. If consultation has been completed within the 30 or 90 day period, the employer may issue the notices at that point“.

Given the wide range of issues that need to be addressed it is difficult to envisage meaningful collective consultation on proposed redundancies being achievable within a 30-day period. In other words, any employer who cuts short a 30-day consultation period will take a very high risk of a protective award. In the case of larger redundancy exercises, giving notice before 90 days have run their full course will be a very risky strategy for an employer whenever unions are still actively trying to engage the employer in consultation.

The “special circumstances” defence

Under section 189(6) of TULRCA, an employer will have a defence to a claim for a protective award if it can show that “special circumstances” made it “not reasonably practicable” to comply with the consultation obligation, and that the employer took all reasonably practical steps to consult (UCATT v H Rooke & Son Limited [1978] IRLR204). This defence is normally very narrowly interpreted by tribunals. In particular where tribunals find evidence of gradual deterioration, so that the employer can see the writing on the wall, the defence is highly unlikely to succeed.

Instead, “special circumstances” should be something unforeseen or unexpected, out of the ordinary run of commercial or financial events. In USDAW v Leancut Bacon [1981] IRLR 295, the sudden withdrawal of a prospective purchaser, forcing the company into receivership, qualified as a special circumstance, whereas the employer in the following case failed to establish the defence:

A recent case brought by general union Unite provides a good illustration of tribunals’ approach to the “special circumstance” defence:

In other words, “special circumstances” will not provide an absolute defence to a claim for a protective award. Instead, they can act as “mitigating circumstances”, reducing the size of the employer’s liability for failing to consult, or even eliminating it altogether. This case shows how a tribunal is allowed to take into account all surrounding circumstances when deciding on the size of the protective award. It is also a reminder that the special circumstances defence is only available to employers in very narrow circumstances.

Redundancy decisions within group companies

Where decisions on collective redundancy are taken within a group of companies, the duty to consult is always owed by the employing subsidiary, even if, in practice, the redundancy decisions are being made by head office. The duty to consult is triggered as soon as the parent company decides that the redundancies are to be located within a particular subsidiary (Akavan Erityisalojen Keskusliitto AEK ry v Fujitsu Siemens Computers Oy, Case 44/08).

Calculating the number of collective redundancies

The duty to consult collectively is triggered when 20 or more redundancy dismissals are proposed. When fewer than 20 redundancies are anticipated, the employer is not legally obliged to carry out collective consultation with the union or employee representatives, but must still carry out individual consultation.

Voluntary redundancies

All employees who volunteer to be dismissed as redundant must be included when working out whether 20 or more redundancy dismissals are proposed.

Similarly, in Graff Diamonds Limited v Boatwright (UKEAT/0148/10/RN), the employer decided to make 19 redundancies, deliberately choosing this figure in order to avoid the collective consultation obligations. This practice is lawful and not unusual amongst smaller employers. However, in this case, 20 employees left the business. The employer argued that the 20th employee had taken early retirement, so that his termination was an ordinary termination by mutual agreement, as opposed to a redundancy. The EAT confirmed that it is for the tribunal, looking at all the facts, to decide whether employment genuinely ended by mutual agreement (meaning that there was no “proposal to dismiss”) or whether an employee has volunteered to be dismissed as redundant, meaning that s/he needed to be included in the calculation for the purposes of section 188. The EAT sent the case back to the tribunal to decide on this issue.

Redeployment

If an employer plans to redeploy some of the affected employees, so that fewer than 20 are likely to end up being dismissed, it must still consult:

Collective consultation and termination of fixed-term contracts

The termination of fixed-term contracts also comes within the definition of dismissals for redundancy for the purpose of collective consultation. An employer is obliged to consult where the total number of dismissals, including the termination of any fixed-term contracts, comes to 20 or more (Lancaster University v The University and College Union [2010] UKEAT 0278/10/2710).

20 or more proposed redundancies at one “establishment”

The duty to consult representatives only arises if the 20 or more proposed redundancies are at one establishment. In many cases, this will not present a problem, but if a multi-site employer is proposing at least 20 redundancies in total, but fewer than 20 in each separate location, reps will have to establish that the various sites make up “one establishment” in order to enforce the right to collective consultation.

There is no definition of “establishment” in the legislation. Whether there is an “establishment” is a question of fact for the tribunal to decide in each case. According to the ECJ in Rockfon v Specialarbejderforbundet i Danmark, acting for Nielsen & others C-449/93 [1996] IRLR 168, an “establishment” is the unit to which workers are assigned to carry out their duties. It does not matter that a unit does not have a management that can take decisions independently.

Whether there is one “establishment” is not always obvious. For example:

Appropriate representatives

Under section 188 of TULRCA, consultation over collective redundancies must take place with “appropriate representatives”.

Where there is a recognised union, the appropriate representatives are representatives of the union. This is regardless of whether the employees at risk of redundancy are union members. If there is more than one union, the employer must consult all the recognised unions, even if members of one union are not affected (Governing Body of Northern Ireland Hotel and Catering College v NATFHE [1995] IRLR 83). If there is no recognised union, the appropriate representatives can be either:

• representatives of affected employees, appointed or elected generally for consultation and information purposes (i.e. a standing non-union consultative body); or

• employee representatives elected by affected employees solely for the purpose of a particular redundancy consultation exercise.

The procedure for electing “appropriate representatives” where there is no recognised union

The employer must invite employees likely to be made redundant to elect employee representatives “long enough before the time when the consultation is required”, and must comply with the rules set out in section 188A of TULRCA. These require the employer to:

• make arrangements to ensure a fair election;

• decide on the number of reps to be elected, so that there are sufficient to represent all the groups affected;

• decide whether each group should independently elect their own reps;

• decide on reps’ length of office; and

• ensure that voting is secret and votes fairly counted.

Candidates for election must be drawn from the affected groups of employees. All affected employees have the right to stand for election and to vote.

In Phillips v Xtera Communications Limited (UKEAT/0244/DM unreported 17 June 2011), the EAT confirmed that where the number of candidates putting themselves forward for election precisely matches the number of representatives required (so that in practice, there is no contest) there is no absolute requirement to hold a ballot.

If an employer has issued an invitation in good time asking affected employees to elect representatives and they have failed to respond to the information, the employer will have a duty to provide the necessary statutory information to every individual affected employee.

Software is apparently now available to enable voting for reps to take place by email. This does carry the risk that an employee who may not see an email, for example because of maternity or sick leave, may miss the chance to vote for a representative. Rushing the voting process, for example, insisting on impractical time periods for voting, increases the risk of a protective award.

Time off for representatives

Reps are entitled to paid time off for consultation over collective redundancies. For trade union reps in recognised workplaces, this right can be found under section 168 (1) (b) of TULRCA.

Where there is no recognised union, rights to time off for appropriate representatives are provided by section 61 of the ERA 96. This says that appropriate representatives, or candidates for election as appropriate representatives, have the right to “reasonable time off” during working hours to perform their functions as a representative or candidate, or to undergo training to perform such functions. Paid time off should be available for:

• candidates to canvass for their election;

• pre-meetings of elected representatives to determine policy;

• meetings with affected employees to canvass views;

• training in the law and industrial relations practice on redundancies, should the representatives feel it is necessary; and

• meetings with the employer.

Time off, as for recognised trade union reps, is paid “at the appropriate hourly rate”. This will normally be the weekly rate divided by the weekly contractual hours. There are special rules for calculating the hourly rate where weekly pay varies.

Facilities for reps

In 2010, Acas updated its Code of Practice on time off for trade union duties and activities. The (non-exhaustive) range of facilities suggested by Acas includes:

• access to means of communication, such as phone, email, intranet and internet;

• accommodation for meetings and pre-meetings;

• dedicated office space; and

• access to training.

As BIS guidance reminds employers: “The speed of the [redundancy] consultative process is likely to depend, among other things, [on] the amount of resource devoted to it. For example, employee representatives should be able to work more quickly where they have access to good facilities to undertake their work and communicate smoothly with other employees”(BIS 2006: Redundancy Consultation and Notification URN 06/1965Y).

Statutory protection for representatives

Reps (whether trade union reps or elected representatives) have statutory protection against dismissal or any detriment connected with their representative role. This protection extends to candidates for election, even if unsuccessful. Protection against detrimental treatment is guaranteed under section 146 of TULRCA for trade union reps in recognised workplaces, and under section 47 of the ERA 96 for all other appropriate representatives.

Protection against unfair dismissal is provided by section 152 of TULRCA for union reps and section 103 of the ERA 96 for other representatives.

In both cases, dismissal because of their representative duties or candidacy is “automatically” unfair. In other words, once it is established that this is the reason for dismissal, the dismissal will be unfair. There is no scope for an employer to argue that the dismissal was “reasonable in the circumstances”. There is no qualifying service requirement.

Remedies for failure to consult — protective award

If an employer fails or refuses to consult, a claim can be made to a tribunal for a protective award. The claim must be made by whoever should have been consulted and it must be brought within three months of the date of the last dismissal. The tribunal has discretion to extend the time limit if it was not reasonably practicable for the claim to be brought in time, but as always, extensions of time are rare.

A protective award is a sum of money paid in respect of every affected employee within the scope of the award. If the employer fails to pay the award once made, individual employees can make a claim to the employment tribunal for payment.

Survey results cited in an Acas discussion paper, Collective Consultation on Redundancies, suggest a lower than expected awareness of the financial penalties triggered by a failure to consult properly. However, those employers who are aware of the existence of protective awards appreciate that a potential 90-day protective award for each affected employee can be hugely expensive. The protective award can therefore work as a powerful incentive to employers to carry out effective consultation.

A protective award is supposed to punish the employer

The purpose of a protective award is not to compensate employees for the loss they have suffered, but rather to punish the employer for failing to consult (Susie Radin v GMB and others [2004] EWCA Civ 180 [2004] IRLR 400). The case was brought by the GMB when manufacturing firm Susie Radin failed to consult adequately over proposed redundancies. The Court of Appeal used the case to lay down guidelines for protective award claims:

• The purpose of a protective award is to punish the employer, not to compensate employees;

• The tribunal should focus on the seriousness of the employer’s default;

• The default may vary in seriousness, from a technical breach of the rules to a complete failure to consult; and

• The deliberateness of the failure may be relevant.

• The tribunal should normally use the maximum 90 days as a starting point and then see whether there are any mitigating circumstances to justify reducing it.

Reps should remember also the discussion of the “special circumstances” defence, and in particular, the recent case of Shanahan Engineering v Unite.

The fact that employees would have lost their jobs anyway, whether or not there had been collective consultation, is irrelevant to the calculation of a protective award.

Calculating the protective award

The maximum protective award a tribunal can make for failure to consult is 90 days’ pay per affected employee. There is no statutory cap to a week’s pay. Instead, the award is calculated using actual gross weekly pay. This means that awards have the potential to be very large indeed. Awards where the employer is insolvent are more limited ( see Chapter 6).

In Canadian Imperial Bank of Commerce v Beck (UKEAT/2010/0141/10), the EAT confirmed that when calculating the protective award, a week’s pay should refer only to basic pay and not to any discretionary bonus, unless a bonus is already due under the contract of employment at the dismissal date.

The maximum award of 90 days’ pay can apply even if the minimum consultation period was 30 days. For example:

When deciding on the seriousness of the failure to consult, a tribunal can take into account consultation that took place before the proposal to dismiss was made. For example:

The fact that the employer’s failure to consult was not deliberate can be taken into account by the tribunal in reducing the size of the protective award. For example:

Who can bring the claim?

If there are trade union or employee representatives, the claim must be brought by the relevant representative(s).

The only circumstance in which a claim can be brought by an individual affected employee is where:

• the claim relates to the employer’s failure to elect representatives; or

• there are no employee representatives.

A claim for a protective award by a union can benefit only those employees (whether or not union members) who are inside the bargaining unit for which it has recognition. This was confirmed in T&G v Brauer Coley (In administration) [2007] ICR 226.

This case was followed in Harford & Others v Secretary of State for Trade and Industry (UKEAT/0313/07), a claim brought by the GMB.

In Independent Insurance v Aspinall (UKEAT/0051/11/CEA), there were no employee reps (union or non-union), and the tribunal initially ordered that a protective award made to an individual employee should extend to all other individual employees who were affected by the failure to consult. The EAT reversed this decision, confirming that an employee who brings an individual claim for failure to consult (i.e. where no representatives have been elected) can only claim a protective award for his own personal benefit and no-one else’s.

In Northgate HR Limited v Mersey (UKEAT/0446/06/DM), the tribunal confirmed that where there are reps in place, whether union or non-union, an individual employee is not allowed to bring a claim for breach of the statutory duty to inform and consult. Mr Mersey argued unsuccessfully that the standing non-union “employee consultation council” installed by his employer did not have the independence of a trade union, and that for him to be genuinely protected, he should be allowed to enforce the protective award provisions as an individual.

Rejecting his argument, the Court of Appeal confirmed that these provisions are primarily intended to deal with complaints about collective issues not individual ones. An individual with a complaint must bring it through his representative, and a tribunal will make “no value judgments” as to the independence or otherwise of non-union verses union reps.

Individual consultation over redundancies

“Redundancy” is one of the statutory “fair” reasons for dismissal under section 98 of the Employment Rights Act 1996 (ERA 96) However, an employer carrying out a redundancy exercise must still act “reasonably in all the circumstances” in order for the dismissal to be fair. In particular, a dismissal is likely to be unfair if an employer has failed to consult before deciding to end the employment, has used unfair selection criteria, or applied the selection criteria unfairly.

Even if there is no duty to consult over collective redundancies because fewer than 20 employees are affected, the employer must consult any individuals who are at risk of redundancy. And remember that the non-renewal of a fixed term contract can amount to an unfair redundancy dismissal (University of Glasgow v Donaldson and McAnally EAT/951/94).

Is there an obligation to consult individually if collective consultation has taken place?

Although the answer will, as always, depend on the facts of each case, an employer may well be expected to consult individually with those selected for redundancy as well as engaging in collective consultation with reps (Mugford v Midland Bank [1997] IRLR 208).

A good redundancy agreement will provide for both collective and individual consultation. In particular, an individual may be able to offer specific personal information on alternatives to avoid their redundancy (Heron v Citylink [1993] IRLR 372). An individual must also be given the opportunity to challenge his or her scores in any redundancy selection exercise.

An employer’s failure to consult individually will not always make the redundancy selection procedure unfair. It depends on the circumstances. In Lawn & others v Hartlepool College of FE EAT/1172/99, the EAT decided that collective consultation with the unions in the period leading up to the announcement of redundancies, together with an invitation to individuals to submit their views during the appeal process, was enough to make the redundancies fair.

In Hammonds LLP v Mwitta [2010] UKEAT 0026/10/0110 (see also Nationwide v Benn [2010] UKEAT 0273/09/2707) the EAT confirmed that an employer’s failure to engage in collective consultation is likely to be relevant when deciding the overall fairness of a dismissal under section 98(4) of the ERA 96, but it will not necessarily mean the dismissal is unfair.

Individual consultation — basic principles

There are no specific statutory rules governing individual consultation. However, in practice, the quality of individual consultation is central to tribunals’ consideration of the fairness or otherwise of most redundancy dismissals.

The High Court has given guidance on what fair individual consultation means. In the case of R v British Coal ex parte Price [1994] IRLR 72, it said fair consultation must include giving the person being consulted a proper opportunity to fully understand the issues and to express views on them, and giving genuine consideration to these views.

Fairness suggests that consultation with the individual employee should take place at every stage of the redundancy selection process, once s/he has been provisionally identified as being at risk of redundancy.

Individual consultation and discrimination

It is sex discrimination not to consult adequately with a woman who is absent on maternity leave (Blundell v Governing Body of St Andrews Catholic Primary School [2007] UKEAT 0329/06/1005). Special arrangements need to be made to ensure that consultation with an employee on maternity leave is adequate. For example, she may not have regular access to work intranet or email, and may not be based at the home address whilst on leave.

Although the legal onus is on the employer to carry out effective consultation (and see in particular the special protection for women on maternity leave, chapter 4), in practice, employees who are on maternity leave during a difficult economic period should be encouraged not just to rely on statutory protections but also to ensure they agree good communication mechanisms, including access to internal jobs via the intranet and to check in regularly with the workplace.

It would be prudent to agree with the employer who is going to be the main point of contact during maternity leave and how that contact is to be maintained. Reliance on postal communications is risky where the employee is to spend long periods away from the house.

Similar practical arrangements should be made to ensure those on long-term sick leave whose jobs are at risk are properly consulted. Failure to do this may result in unfair dismissal and/or discrimination for a reason arising from disability. Staff on secondment should also be catered for.

Consultation and indirect age discrimination

In Mayor and Burgesses of the London Borough of Tower Hamlets v Wooster EAT/0441/08, the EAT upheld a finding that the redundancy dismissal of a 49-year-old employee amounted to age discrimination.

The employer, a local council, could have found alternative work for Mr Wooster but did not do this because it knew that if he were to remain employed up to the age of 50, he would be entitled to a more generous early retirement package.

But in a more recent case, the EAT reached the opposite conclusion:

Individual consultation and unfair dismissal compensation

Where a tribunal concludes that an employee would have been dismissed in any event, even if the employer had consulted properly, a tribunal is likely to reduce the amount of any compensation awarded. This is known as a “Polkey” reduction, after the House of Lords’ case of Polkey v AE Dayton Services [1987] IRLR 503, which established the principle.

For example, if a tribunal concludes that fair consultation would have taken four weeks, but that at the end of the consultation period, the employee would almost certainly have been dismissed anyway, the likely compensatory award would be limited to four weeks’ wages, to reflect the additional wages the employee would have earned if the employer had engaged in proper consultation. For example:

The unfair dismissal compensation paid to the employee in this kind of claim is likely to be low, perhaps as little as 2-4 weeks’ wages, depending how long proper consultation would have taken to complete. Sometimes it can even result in no award at all, as the following case demonstrates:

But where an employee can produce persuasive evidence that, had consultation been effective, the employee may not have been made redundant at all, there is the prospect of far larger compensation, based on the net lost earnings of the employee for as long as s/he could reasonably be expected to take to find another job, taking into account the prevailing economic climate.

The employee has an obligation to take reasonable steps to mitigate his or her losses, by looking for another job, and an individual in this situation should keep a careful log of job adverts, applications, and interviews, with supporting evidence, such as copies of letters applying for jobs.

Where there is credible evidence that the employee would have lost his or her job anyway in a further round of redundancies, this will also reduce the level of compensation awarded.

If an employee refuses to take part in consultation, s/he risks having any compensatory award reduced (Campbell v Dunoon Cowal Housing Association [1993] IRLR 496).

Note that the Acas Code of Practice on discipline and grievance 2009 (which provides for increases in compensation of up to 25% for unreasonable failure to follow the Code) does not apply to dismissals due to redundancy. Acas has produced a separate guide to redundancy dismissals: Redundancy handling, which can be downloaded, free of charge from the Acas website: www.acas.org.uk.

Time limits

As with other unfair dismissal cases, there is a three-month time limit from the date of the dismissal in which to lodge an employment tribunal claim.