The recent publicity surrounding hundreds of former workers at a Midlands clothing factory who were made redundant following its closure, are to receive a payout of more than £1 million, acts as a reminder of the need to follow correct procedure.
In this case, more than 300 workers were told in May last year that they had lost their job, when the firm went into administration. The workers claimed they had not been consulted properly on the redundancy plans. The Employment Tribunal ruled that 314 workers should be awarded compensation worth an estimated £1.13 million. It means that each worker should receive in the region of £3,600 each. As the firm no longer exists the compensation is likely to be paid from the National Insurance Fund.
Consultation on redundancy is required on two levels. Firstly, legislation sets out specific circumstances under which you must “Collectively” consult with appropriate representatives. Secondly, case law has clearly established that you must always consult with employees at risk of redundancy on an individual basis.
Consultation timescales as set by legislation are as follows:
* None required by law but it is recommended that at least 14 days consultation be given on an individual basis.
** The 20/100 should include redeployments (where there is no contractual mobility clause) and volunteers (providing they are volunteering for dismissal on grounds of redundancy). The 20/100 does not need to include fixed term workers where the contract is coming to a natural end.
You are required to consult with ‘appropriate representatives’ of any of the employees who may be affected by the proposed dismissals or by any measures taken in connection with those dismissals. “Appropriate representatives” will be either:
If you already recognise an Independent Trade Union you MUST choose option a).
Consultation must be meaningful and genuine and must include discussion about ways of:
During collective consultation, you have a statutory duty to provide a written disclosure of certain specified information and if you are in this situation, you are advised to seek specialist advice.
If you fail to comply with statutory consultation procedures, then a complaint may be made to an Employment Tribunal. The maximum penalty could be an order by the Employment Tribunal to make a Protective Award to those dismissed, or proposed to be dismissed, of up to 90 days’ pay, which is what happened in the above case. This could be in addition to any award for unfair dismissal.
Some other key legal requirements
If you are planning to dismiss an employee, please seek advice beforehand. If you do dismiss an employee unfairly it could be costly! The maximum compensatory award for unfair dismissal is a year’s pay capped at £78,962 (increasing to £80,541 for dismissals after 06/04/2017) (plus basic award).
Legal Expense Insurance
If you have taken advantage of legal expenses insurance providing protection against Employment Tribunal defence costs and awards, it is a usually a condition of that insurance that you have taken advice from a qualified adviser before taking action. Failure to do so may well result in your insurance being invalidated.
In any event it is always better to check with a specialist before taking any action against an employee.