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Proposed reforms to the collective redundancy consultation regime

 

The Government has published its response to the Call for Evidence on the current collective redundancy consultation regime (the Consultation). The proposals set out in the Consultation are aimed at revitalising the collective consultation regime and creating a "flexible framework to support high quality consultation". The Consultation closes on 19 September 2012 and any legislative changes are to be introduced in Spring 2013.

Legislative background

Where an employer wishes to make in excess of 20 redundancies from the same establishment within a 90-day period, it must consult with representatives of the affected employees (including trade unions where present) about the proposals.  This protection for employees is set out in sections 188 – 198 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), which implements the EU Collective Redundancies Directive 98/59 (the Directive). Although the Directive does not specify minimum time periods for the consultation process, TULRCA provides that no redundancy can take effect until at least:

 

(i) 30 days after the start of consultation where 20 – 99 redundancies are proposed; or

(ii) 90 days after the start of consultation where 100+ redundancies are proposed.

 

Accordingly, the minimum periods of consultation in TULRCA are said to represent "gold plating" of the protection enshrined in the Directive.

 

The Call for Evidence

 

The Government's position is that the legislation on collective redundancy consultation is unsuitable for the modern working environment in the UK.  The Government's view is that the special treatment for redundancies of 100+ employees in a 90-day period appears increasingly arbitrary. 

 

The Call for Evidence sought evidence on whether the current rules were felt to present a barrier to flexibility in the labour market.  A total of 108 responses were provided, yet the Government acknowledged that a disappointingly small amount of quantitative data on the impact of the current rules was received.  Nevertheless, the responses broadly supported the view that the current system requires change. 

 

The Proposals

 

The Consultation seeks views on the following key proposals:

 

(i) Reducing the 90-day minimum period for redundancies of 100+ employees:

 

The conclusion of the responses to the Call for Evidence is that the 90-day consultation period is not conducive to good consultation: it encourages employers to artificially break up redundancies to avoid the longer consultation period and delays restructuring where consultation has been exhausted.  The Consultation also notes that there was no appetite amongst respondents for higher or graded thresholds covering a number of different redundancy sizes and time periods.

 

The Government, therefore, intends to reduce the 90-day minimum to either 30 days or 45 days.  The Government's view is that a reduced consultation period will allow employers to restructure more quickly, make savings on the costs of wages and, potentially, reduce the number of redundancies overall.  It is also considered that employees will benefit from having greater certainty which, it is thought, perhaps somewhat optimistically, will improve employee morale.

 

However, it should be noted that the Government does not intend to reduce the maximum protective award of up to 90 days' pay per employee.  The Consultation highlights that the award is not linked to the length of the consultation but to the employer's efforts to comply.

 

(ii) Guidance on meaning of "establishment" and treatment of fixed-term appointees:

 

The conclusion of the responses to the Call for Evidence was that there was confusion around the meaning of establishment.  However, the Government's view is that the constraints of European case law on this issue make producing a legislative definition to resolve this uncertainty too difficult and risky.  Instead, further guidance on the meaning of establishment will be included in the new Code of Practice.

 

The responses also identified concerns about the inclusion of fixed-term appointees in collective redundancy consultation exercises, particularly in the higher education, retail and construction sectors.  However, the Government's view is that any legislative exemption for fixed-term appointees would be inconsistent with the protection afforded under the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002.  Instead, further guidance on the treatment of fixed-term appointees will be provided in the new Code of Practice. 

 

(iii) New Code of Practice and Guidance:

 

The Government is proposing to introduce a non-statutory Code of Practice which will "focus on the principles and behaviours that help to ensure that consultation is conducted in the right spirit and considers the correct issues".  The Government will also review the existing guidance to ensure that it is accurate, fit for purpose and easily accessible.  Consideration will be given to the inclusion of case studies which help to demonstrate effective collective redundancy consultation in practice.

 

Comment

 

A reduction in the length of the consultation period for large scale redundancies is welcome from an employer's perspective.  In particular, a reduction to 30 days would create a uniform consultation period for all collective redundancies.  Whilst employers will have greater flexibility as to restructuring, care will need to be taken to ensure that the consultation is meaningful as the penalty for a failure to consult is unchanged at a maximum of 90 days' pay per employee.

 

BIS consultation on changes to the rules on collective redundancies 

 
 
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