It has been reported that the former directors of parcel firm City Link will be prosecuted for the failure to notify the Department for Business, Innovation and Skills (BIS) of proposed redundancies as is required by redundancy legislation.

What’s happened?

It has been reported that the former directors of parcel firm City Link will be prosecuted for the failure to notify the Department for Business, Innovation and Skills (BIS) of proposed redundancies as is required by redundancy legislation.

This is a powerful reminder to all companies considering collective redundancies that the notification requirement must not be overlooked.

What does the law say?

Section 194 of the Trade Union and Labour Relations (Consolidation) Act 1992 says that an employer who is proposing to make 20 or more redundancies at one establishment within a period of 90 days or less must notify BIS before the dismissals take effect.

The notification requirement has always been backed up by criminal sanctions:

  • An unlimited criminal fine can be imposed on the employer (though for breaches before 12 March this year, the fine is £5,000); and
  • Where the failure to notify is committed with the “consent or connivance” of a director or officer, or is attributable to his or her neglect, the director or officer also commits an offence and may be “punished accordingly”.

It was generally thought that the criminal regime was a damp squib. However, we have seen over the past year or so increased activity by BIS in relation to this requirement.

The City Link case is very significant because it shows that BIS is prepared to pursue senior management for procedural oversights made further down the organisation: essentially showing that BIS expects management to take active responsibility for ensuring that the government is kept informed of potential redundancies. We will have to wait to see whether the case is made out and what the court considers the right punishment to be.

How and when should the notification be made?

The notification is made on a form called HR1. It can be found here. The form is relatively straightforward. Employers must complete some basic factual details about the redundancies and this may include the selection criteria being applied.

The notification must be made at least 45 days before the first redundancy takes effect (in the case of 100 or more redundancies) or 30 days before (in the case of between 20 and 99 redundancies).

There is a debate about whether notice of dismissal can be given to employees before the BIS notification has been made (for example, can a notice to dismiss that takes effect in two months be issued, where the BIS notification is made only 45 days before the dismissal?). There is a risk that employees will argue that these notices are not valid, or are unfair. We have not seen employees running this argument but with BIS taking a more active stance on the notification regime, unions in particular may start to challenge employers on this.

Anything else?

  • The HR1 should also be sent to any employee representatives that are being consulted about the redundancies.
  • BIS can ask for further information following receipt of a notification. Although we generally haven’t seen this happen in practice, we think they may start to do this more in the future.
  • Employers can try to rely on a “special circumstances” defence where it is not reasonably practicable to comply with the notification requirements. The City Link redundancies were made following the start of administration proceedings – it is clear that BIS considers the special circumstances defence to be very narrow.
  • Employees who work outside Great Britain do not need to be counted towards the redundancy thresholds for notification purposes.
  • In calculating the number of redundancies at one establishment, employers can disregard any dismissals already notified to BIS (this might help if a BIS notification is made in respect of a group of employees and then there is a subsequent redundancy of say 15 people – these 15 alone are not enough to trigger another notification obligation).