Criminal prosecutions for failure to file the HR1 form

There has  been widespread coverage recently in the media regarding the criminal proceedings that have been brought by the Insolvency Service against David Forsey, former director of USC and three former directors of City Link.

The proceedings have been brought under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). This requires employers to collectively consult with employees at risk of redundancy for at least 30 days in cases where there are 20 to 99 proposed redundancies, or for at least 45 days in cases where there are 100 or more proposed redundancies. It also requires employers to notify any unions before commencing the consultation and the Secretary of State via the "HR1" form.

Under section 194 of TULRCA if the employer fails to file the HR1 form within the collective consultation timescales, the organisation commits an offence which can result in a fine which is uncapped.  Additionally, an offence is committed if done so with the "consent or connivance of, or… attributable to neglect on the part of, any director, manager, secretary or other similar officer." In such cases, the individual is subject to an unlimited fine and/or disqualification from acting as a director for up to 15 years.

It is unusual for the Insolvency Service to bring such proceedings against individuals. However, these cases demonstrate perhaps a more robust approach. They therefore serve as a cautionary tale for employers that are making such large scale redundancies to ensure that the necessary statutory steps are followed at the relevant times.

Supreme Court decision in USA v Nolan

The Supreme Court has held that the obligation to consult in relation to collective redundancies under section 188 of TULRCA can apply even  in cases where such redundancies arise due to the strategic decisions of foreign governments.  However, the key point for most employers, regarding when the obligation to consult collectively about proposed redundancies arises, has been remitted back to the Court of Appeal.

In this decision the Supreme Court rejected the USA's three grounds of appeal that the collective redundancy provisions should not apply. The USA's arguments were that:

  • TULRCA should be interpreted in accordance with the Collective Redundancies Directive (Directive) so that it would not apply to the decisions of foreign states made in their sovereign or governmental capacity (and thus workers working on a US military base in the UK would be excluded). The Supreme Court rejected this on the basis that the legislation was clearly drafted and this was not as a result of an oversight.
  • It was a principle of international law that one state cannot legislate in such a way as would affect the sovereign activity of a foreign state. The Supreme Court did not accept that there was any such principle which should apply in this case.
  • The amendments to TULRCA made by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995 were ultra vires by virtue of introducing an obligation to consult employees without trade union representation, which went beyond the protection conferred by the Directive. The Supreme Court rejected this argument on the basis that it was possible for domestic legislation to be extended into areas outside that covered by the Directive.

This decision means that the substantive consultation "trigger point" issue has been remitted to the Court of Appeal. This point hinges on whether the obligation arises either when:

  • the employer proposes, but has not yet made, a strategic or operational decision that will forseeably or inevitably lead to collective redundancies; or
  • when such decision has actually been made and the employer is proposing consequential redundancies.

 USA v Nolan