As a result of the Covid-19 pandemic, many employers are contemplating large-scale redundancies by the time the furlough scheme ends on 31 October 2020. Airbus, the BBC, Harrods, Accenture… the headlines multiply as organisations from various sectors enter collective employee consultation. Here, Sarah Austin and Garyn Young explain how the process works.
The obligation to collectively consult arises when an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.
If employers fail to collectively consult where the duty applies, any resulting dismissals will almost certainly be considered unfair by the Employment Tribunal, meaning employees will be entitled to a basic award and a compensatory award.
An Employment Tribunal is also entitled to award a protective award, which can be up to 90 days’ gross pay in respect of each employee, if they consider there has been a breach of the duty to inform and consult by the employer.
Depending on the number of employees that the employer is proposing to make redundant, there are different minimum time periods which apply from the date consultation starts to the date the first dismissal takes effect, which are:
When employers propose to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. But what does ‘proposing to dismiss’ mean? There is no statutory definition, but some useful principles have been established through case law:
Consultation must also begin in ‘good time’, which in practice means ensuring that the period provided for consultation is adequate to reach an agreement on the various issues to be consulted on.
Appropriate representatives of the affected employees. If the employer recognises a trade union in respect of any of the affected employees, then the trade union representatives will be appropriate representatives. But if the trade union is not recognised in respect of some or all of the affected employees, then the employer must consult other appropriate representatives in respect of those employees.
If no trade union is recognised in respect of the affected employees, the employer can choose to consult with either representatives who are directly elected by the affected employees or any pre-existing standing body of employee representatives, provided they have authority from the affected employees to be consulted regarding the proposed redundancies.
If an election is necessary, the employer should factor in a time frame (before consultation begins) to put the employee representatives in place. There is no specified process for the election, but there are specific minimum requirements which employers must adhere to.
If staff have been furloughed, it is possible to organise a remote ballot to elect employee representative. However, the employer must ensure that they comply with the general requirements for election processes, despite using remote ballot technology.
One of the key issues will be to decide whether to divide the affected employees into constituencies for the purposes of consultation or treat them as a whole. Either way, the employer needs to ensure that the interests of all of the affected employees are represented.
The consultation process begins with specific information on the proposed redundancies being given to representatives in what’s known as a ‘section 188 letter’.
As a minimum, employers are obliged to consult on ways of:
However, to avoid claims of unfair dismissal, employers should also consult on the information which should be included in a section 188 letter, including but not limited to the proposed selection criteria.
Provided employers are able to comply with all statutory requirements in relation to collective consultation, there is no specific bar to employers collectively consulting during furlough.
It is likely that consultation meetings will take place virtually and that communication outside of those meetings will be by email. Employers should make sure that representatives and all affected employees have access to the relevant technology.
Most, if not all, employers will have to have some form of communication process in place already to keep employees informed during the COVID-19 crisis. If there is no existing method of communication, employers will need to set one up. If employees do not have company email addresses which they have access to during furlough, the employer will need to obtain their permission to give out their personal contact details to the representatives.
Putting in place Q&A documents which are accessible to employees and are updated throughout the consultation process can help to ease the pressure on representatives.
If English is not the predominant first language of the workforce, or if a variety of different languages are spoken by employees, employers may also want to consider translating communications.
Yes. Collective consultation does not negate the need to consult individually. However, the individual consultation process is likely to be streamlined, as many of the issues which would otherwise be individually consulted on will already have been dealt with through collective consultation.
There is no requirement to reach agreement. However, they must have either reached agreement or exhausted all possibility of reaching an agreement. If consultation is closed and not all avenues of reaching agreement have been explored, this is likely to be breach of the duty to inform and consult.
Employers do not have to wait until the 30/45-day consultation period has expired before they can serve notice, provided they have fully consulted with appropriate representatives and employees individually before serving notice, and provided employment doesn’t end before the minimum consultation period.
Our view is that employees being on furlough leave is very unlikely to be considered ‘special circumstances’.
Employers are obliged to notify the Secretary of State for Business, Innovation and Skills where they are proposing to dismiss as redundant 20 or more employees at one establishment within a 90-day period. This is done by using a HR1 form. The timing of the notification depends on the number of proposed dismissals:
Failure to inform the Secretary of State can lead to a fine of up to £5000.
The Employees’ CJRS guidance confirms that an employee can be made redundant whilst they are on furlough and the existence of the furlough scheme will not in itself make a dismissal for redundancy unfair. But to avoid a dismissal being unfair, it is important that employers can show that furlough has been considered as an alternative to redundancy, and why for them it is not a workable alternative.
This will be particularly relevant from 1 August 2020, when employers must start paying employer NI and employer pension contributions on furlough pay, and subsequently when they are required to contribute to furlough pay, meaning furlough will not be a cost neutral option.
The fact that employers may need employees to carry out the same or similar roles at some point in the future does not preclude there being a genuine redundancy situation, or mean that they are obliged to continue furloughing employees until the furlough scheme closes.
Under the guidance on furlough, employees are unable to ‘work’. The definition of ‘work’ in the government guidance is anything which is ‘providing services’ and/or ‘generating revenue’ for the employer.
Both the Employers and Employees CJRS guidance was updated on 30 April 2020 to state that employee representatives can take on duties for collective or individual redundancies during the furlough period.
Employers cannot use money received under the furlough scheme to make statutory or enhanced redundancy payments or to pay employees in lieu of notice once employment has ended.
Our view is that employers probably can do this, but the position is currently unclear. The most recent Treasury Direction refers to the integral purpose of the CJRS scheme being that employers only claim under the scheme if the employer intends to use them to continue employment. This could be interpreted to mean that employers should not claim under the scheme where they intend to terminate employment, including by reason of redundancy.
However, it is also arguable that whilst an employee is employed and on notice, their employment is continuing, and therefore employers can continue to claim under the CJRS scheme where an employee is serving notice. We understand that some employers who have contacted HMRC have been verbally assured that using CJRS funds to pay employees who remain employed and are furloughed and under notice of termination is within the rules of the scheme, but this has not been confirmed in writing and is not legally binding.
We will update this note once this issue has been clarified.
The rules on what rate of notice pay should be paid for people who have been furloughed depend on their contractual entitlement to notice. We suggest employers take advice on this.
Please note that these FAQs do not constitute legal advice. Collective consultations are a complex process, with challenges particular to each organisation. If you would like to discuss any of the above in further detail, or have any question about redundancies and workforce restructuring, please don’t hesitate to get in touch.