Definition of a collective dismissal
“Redundancy” is defined as dismissal for a reason not related to the individual employee concerned or for a number of reasons, all of which are not so related. Obligations to consult collectively are triggered where an employer is proposing to dismiss as redundant 20 or more employees within a period of 90 days or less. This is in addition to the steps that an employer must take to ensure that the dismissal is fair.
An outline of the procedure that an employer should follow in respect of the proposed dismissals is available here.
Obligations to inform and consult works councils
If an employer carrying out collective redundancies has an information and consultation mechanism under the Information and Consultation of Employees Regulations 2004 (the ICE Regulations) or an agreement with a recognised trade union, it may have additional duties to inform and consult over and above the normal process. The maximum penalty for failing to comply with the ICE Regulations is £75,000.
Obligations to inform and consult other representatives of employees
In a collective dismissal situation, an employer must consult appropriate representatives about the dismissals. Consultation must begin "in good time" and must, in any event, begin 45 days before the first dismissal takes effect (100+ redundancies) or 30 days before the first dismissal takes effect.
Obligations to consult individual employees
In addition to consultation with appropriate representatives, consultation should also be carried out on an individual basis with affected employees in order to ensure that the dismissal is fair. Employees acquire the right not to be unfairly dismissed after two years of continuous service.
Obligations to notify public authorities
The employer is required to give certain particulars to the Secretary for State (on a form HR1).
In assessing the fairness of dismissals, tribunals will first look to the "pool" from which the selection was made. Where no agreed procedure or customary arrangement exists, the issue is one of reasonableness.
Obligations to search for alternative employment
The search for alternative jobs for potentially redundant employees is an important part of the redundancy procedure. Furthermore, employees who have completed at least two years' continuous employment are entitled to reasonable time off to seek alternative employment.
Penalties for failure to comply with notification requirements
Failure to comply with the obligations to notify the Secretary of State is a criminal offence and may result in a fine.
Penalties for failure to comply with consultation process
If an employer has acted in breach of his duty to consult, the tribunal must make a declaration to that effect and may make a "protective award". This is an award of pay to the employees affected for a "protected period" which continues for however long the tribunal decides is "just and equitable" up to a maximum of 90 days’ pay. The employee gets a week's pay for each week of the protected period. For these purposes, a week's pay is not subject to a maximum.
Penalties for failure to comply with redundancy process
If an employee believes that he has been unfairly dismissed and has been employed for at least two years they can claim unfair dismissal.
An employee will generally be entitled to notice of termination.
Payments due to employees
Statutory redundancy payment
An employee is entitled to a statutory redundancy payment if he has been employed for a continuous period of two years or more by the same employer.
(A) The amount is determined by the length of time the employee has been continuously employed, his normal week's pay and his age. The payment is subject to a maximum of 20 years' reckonable employment and a maximum week's pay (the current maximum and total amount which may be awarded is available here).
(B) When making the payment the employer must give the employee a written statement showing how the payment has been calculated and it is an offence not to do so.
Enhanced redundancy payment
Employers will often pay enhanced redundancy payments. Monies paid pursuant to a scheme approved by HM Revenue & Customs or which otherwise amounts to genuine compensation for loss of office may be paid tax free up to £30,000.
Settlement/waivers of claims
In most cases where the employee has more than one year's service and an employer is choosing to make an enhanced redundancy payment it will be sensible for the employer to obtain from the employee a waiver of claims in return for the payment.
Further information on collective dismissals in England and Wales is available here.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.