Redundancy & Collective Consultation - A Welcome Decision For Employers With Multiple Worksites

When 20 or more redundancies within a period of 90 days are proposed at one establishment, an employer must follow the legislative provisions on collective consultation. Requirements under collective consultation provisions include:

• Notifying BIS of the proposed redundancies. (It is a criminal offence not to do so)
• Informing and consulting with appropriate representatives of the employees.
• Starting consultation in good to time in order that no dismissal takes place prior to the end of a period of:
  • 90 days from the commencement of consultation if 100 or more redundancies are proposed at one establishment (although this is set to change to 45 days on 6th April 2013 as set out below).
  • 30 days from the commencement of consultation if less than 100 but 20 or more redundancies are proposed at one establishment.

In order to understand whether and to what extent the collective consultation provisions apply in any given situation, it is, therefore, necessary to assess the number of redundancies proposed at one establishment within 90 days. If there are less than 20 proposed redundancies then no collective consultation requirement arises. Similarly, if there are 20 or more but less than 100 proposed redundancies then the minimum period to be observed from commencement of consultation to the first dismissal is only 30 days rather than the present 90 days.

A lack of statutory guidance and clear case law on the meaning of “establishment” left employers with multiple worksites in a position where it was unclear whether they must look at the number of proposed redundancies at one worksite or across the organisation as a whole. If the meaning of establishment could be narrowed to a worksite rather than an organisation as a whole, in many situations, this could allow the employer to avoid the “trigger” 20 or 100 proposed redundancies.

The Employment Appeal Tribunal (EAT), in Renfrewshire Council v Educational Institute of Scotland, was recently tasked with determining the meaning of the word “establishment” for these purposes. The case involved several teachers represented by their union who believed that the Council had failed in its duties under the collective consultation provisions to inform and consult. The Council contended that an individual school could be one establishment and the union argued that it must mean something wider. The Employment Tribunal agreed with the union and held that a specific school could not be considered one establishment. It noted that although teachers tended to work for one school, that much control lay outwith any school in relation to aspects such as staff terms and conditions, serious disciplinary issues and budget aspects. The Employment Tribunal held that the entire Education and Leisure Department of the Council was the “establishment” for these purposes.

This outcome may have resulted in many employers facing collective consultation more frequently where they have more than one worksite and a degree of “head office” control over such sites.

Fortunately for employers, the EAT overturned this decision and remitted the case back to the Employment Tribunal to reconsider. The EAT held that the word “establishment” is much narrower than organisation, and indicates a “physical presence”. The EAT held that the focus should be to identify the unit to which workers are assigned to perform their tasks in a factual sense from the worker’s point of view. The test on this basis focuses less on contractual mobility terms and central management control to the position in fact from a work perspective.

Whilst the decision in any given case on this matter is very fact driven this guidance from the EAT should assist employers with more than one worksite to determine whether any proposed redundancies will require the application of collective consultation provisions. It is also likely, for many employers, to reduce the number of instances when the “trigger” 20/100 proposed redundancies are reached when dealing with multiple sites.

More Changes Ahead

The Government has published a set of draft regulations which amend the current collective consultation requirements. These are to come into force on 6 April 2013. Under these regulations:

• The 90 day period between consultation and dismissal is to be reduced to 45 days (where there are 100 or more proposed redundancies).
• The meaning of redundancies for the purposes of determining the application of collective consultation is wide and usually includes any termination of employment which does not relate to the employee specifically. The regulations indicate that it will now be permissible to exclude dismissals from the total redundancy headcount which occur as a result of reaching the end of a fixed term contract, completion of a specific project, or the occurrence of an event as set out in the contract.

The Government has also indicated that an ACAS code of practice providing guidance on questions such as the meaning of “establishment” is to be introduced to assist employers through collective consultation requirements.