The Department for Business, Innovation and Skills (BIS) has issued a call for evidence following the publication of a critical parliamentary report highlighting collapsed courier City Link’s failure to consult with redundant employees. The report is particularly critical of City Link's directors who were aware of the company's financial problems but, it was found in the report, did not consider the impact of alerting its staff until late in the day.

The report states "It is clearly in the financial interest of a company to break the law and dispense with the statutory redundancy consultation period if the fine for doing so is less than the cost of continuing to trade for the consultation period and this fine is paid by the taxpayer. However, while the financial calculation is simple, ignoring the consultation period has a high human cost that appears not to have featured in the decision making process. Employees are denied a reasonable notice period in which to seek alternative employment and instead, at a time of financial uncertainty, must pursue a court claim for lack of consultation if they wish to be compensated."

Separately, following recent employment tribunal decisions concerning the duty to consult, the Government held a Ministerial meeting with key stakeholders in February 2015 to explore (i) the specific impact the circumstances of facing insolvency, or being insolvent, has on effective consultation and (ii) the process and role of both directors and insolvency practitioners in the duty to consult under the Trade Union and Labour Relations (Consolidation) Act 1992.

BIS is seeking to understand what happens in consultation with employees when a business is imminently facing, or is in a formal insolvency process, and suggestions for how outcomes for both employees and businesses might be improved. It has invited evidence and views through a number of specific questions focusing on the following areas:

  • Employers understanding of the current requirements, their purpose and benefits
  • Factors that facilitate and/or inhibit effective consultation
  • The role of directors and insolvency practitioners
  • Ensuring timely notification and effective consultation  

From responses to the questions, examples of good practice and suggestions for improvement, BIS will then consider whether or not any policy changes are necessary.

This is a potentially significant call for evidence not least because it is the first change to the legislation being considered by BIS since April 2013 when the minimum redundancy consultation period for employers proposing 100 or more redundancies in a period of 90 days or less was reduced from 90 days to 45 days.

The call for evidence closes on 12 June 2015.