Redundancy Consultation: Big Changes Coming…

redundancyIn our June 2012 Newsletter, Government News: Collective Redundancy Consultation, we discussed the Government’s consultation on collective redundancy. This consultation proposed changes on the basis that the current 90-day collective redundancy regime is “unsuitable for the current UK labour market”; the law is “too restrictive”; and Government guidance is “not clear enough”.

The Government has, this month, responded to the consultation and confirmed its intention to change the way employers consult. The Government intends that the amended legislation and accompanying ACAS guidance will be in place for 6 April 2013.

What’s now?

Currently, an employer is required to inform and consult with trade union or other elected employee representatives where it is proposing to make 20 or more employees at ‘one establishment’ redundant (or to dismiss them if they won’t agree to changed terms of employment) within a period of 90 days or less. Consultation must begin no later than 30 days, where between 20 and 99 redundancies are proposed, or 90 days, where 100 or more redundancies are proposed, before the first dismissal takes effect.

Also, currently, those members of staff on fixed term contracts need to be accounted for, and included in, a collective consultation process. This has led to much uncertainty for employers, particularly those in the higher education sector, over whether fixed-term contracts which have reached the end of their natural life trigger a requirement to conduct collective redundancy consultation. When employers do consult in these circumstances the consultation is often meaningless as the options for extending the fixed term contract are very limited.

Furthermore, there is currently unwelcome uncertainty over what counts as ‘one establishment’, leading to costly litigation and delays to business decision-making. The Government has been unable to provide a legislative solution to this confusion as the issue is governed by European case law.

What’s new?

The Government intends to change the law as follows:

  • where 100 or more redundancies (or dismissals of those refusing to accept changed terms of employment) are proposed, consultation will need to begin no later than 45 days before the first dismissal takes effect (rather than the previous 90 days);
  • when fixed-term contracts expire at the end of their agreed term they will be excluded from collective redundancy consultation obligations; and
  • ACAS will produce non-statutory guidance to address the following:
    • when consultation should start;
    • who the consultation should cover;
    • who should be consulted;
    • what should be discussed;
    • how the consultation should be conducted;
    • when consultation can be considered complete; and
    • the interpretation of ‘one establishment’.

Comment:

This is good news for employers and most will welcome the speeding up of the consultation process and increasing flexibility for employers.

However, many respondent organisations to the consultation had called for the Government to reduce the consultation period to 30 days for all collective redundancies, rather than the proposed 45 days, for over 100 redundancies. There will inevitably be some disappointment that the Government has not gone far enough and, in doing so, has retained a confusing two tier consultation process (30 days for 20-99 redundancies; and 45 days for 100+).

Also, ACAS faces a challenging task to provide meaningful and authoritative guidance in this area. This is because it can only provide guidance within the parameters of current UK case law and it is this which is currently confusing.