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Redundancy consultation: The impact of the new rules

Mary Clarke, a Partner in our Manchester office, comments:

The Government recently made a surprising announcement that it intends to push back many of its employment reforms from April 2013 to “the summer” (with no further specifics given).  Importantly, however, one important reform  has survived the Government’s timetable juggling and will still come into effect in April 2013. This is the proposal to reduce the number of days which must elapse between consultation beginning, and dismissals taking effect, in the case of large-scale redundancies.

From 6 April 2013, employers who are proposing to dismiss 100 or more employees will only have to begin consultation 45 days before any dismissals take effect, rather than 90.  The 30 day period will continue to apply where between 20 and 99 redundancies are proposed. The regulations can be viewed here.

At first glance, this seems like good news for employers. It allows employers to start consultation later and potentially gives greater flexibility by allowing employers to react more quickly to changing economic conditions. However, employers must always bear in mind that consultation must be meaningful.   Notwithstanding the new minimum period, if there are issues regarding pools and selection criteria, a 45 day consultation period may not be sufficient to ensure appropriate consultation takes place.

There is another catch as well. The regulations provide that the new 45 day period will apply to “proposals to dismiss as redundant 100 or more employees … which are made on or after 6 April 2013′.

The difficulty here is how an employer can determine with any certainty (and subsequently demonstrate to an employment tribunal if challenged)  that a proposal to make redundancies was made on or after 6 April. This is because redundancy proposals generally evolve over a period of time.

The practical impact of this is that employers who are involved in large-scale redundancy exercises after 6 April will need to consider carefully whether there were any discussions about possible redundancies before 6 April.  Such discussions could potentially be evidence that a proposal to make redundancies was made before that date. This could be subsequently relied on by an employee’s trade union or employee representative at tribunal to establish that consultation should have begun at least 90 days before the first dismissals, rather than 45.

Getting the consultation process right is essential – any shortcomings can be financially devastating. Tribunals can make a protective award of up to 90 days’ pay per affected employee where an employer fails to comply with its consultation obligations (this has remained unchanged despite the reduction in the consultation period). Employers who have any doubts about when redundancy proposals first began will need to weigh up the costs of an additional 45 days’ consultation, against the risk of a substantial protective award.

The regulations also make changes in relation to fixed term contracts.  They provide that when an employer makes proposals to make 20 or more employees redundant it can exclude from the scope of collective consultation obligations fixed term contracts which have reached their agreed termination date. In order to fall within the exclusion the contract must be clear about when it ends, either in relation to time or the completion of a specified task.  The effect of these changes is that an employer must first consider how many redundancies it is proposing and then disregard the employees on relevant fixed term contracts in determining which consultation obligations are triggered. However, a fixed term employee whose dismissal is proposed before the agreed termination date must still be included in the numbers for collective consultation.

We are still waiting for new non-statutory ACAS guidance which is designed to assist employers to understand their collective consultation obligations. With just days to go before the new rules come into force, employers will have very little time to digest the information before the new regime takes effect. Over coming months it remains to be seen whether the Government’s reforms will have eased burdens on employers or whether they will simply result in more litigation.

UPDATE (8/4/2013) : The ACAS guidance has now been published and is available to read here.

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