For Propcos, the effective use of people resources is a key issue as for many business; in recognition of this, the Government has recently amended the rules around group redundancies and also clarified the position in relation to terminating those on fixed term contracts, which should make it easier for those where the structure of the work is project based and staff are appointed for fixed periods during the life of the project.

In addition important new guidance on redundancies has been issued by ACAS addressing, amongst other matters, the important point of how to consult in redundancies across a number of workplaces with the same employer or group ( which the law calls "establishments").

The Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment) Order 2013)brought into effect the changes to collective redundancy consultation announced before Christmas.

A reduction in the 90 day consultation period

The Regulations reduce from 90 to 45 days the consultation period before the first dismissal takes effect, where an employer is proposing to dismiss 100 or more employees at one establishment within a period of 90 days or less. The new 45 day period applies to proposals to dismiss made on or after 6th April 2013. Similarly, the 90 day period to notify the Secretary of State (the HR1 form) is reduced at the same time to 45 days.

The exclusion of fixed term contracts

The Regulations clarify recent case law and confirms these numbers exclude the normal expiry of fixed term contracts from collective redundancy consultation duties but not if the fixed term employee is to be made redundant at an earlier point, for example, before the expiry of the fixed term. This clarification is welcome given that the definition of redundancy for collective consultation purposes includes "dismissals for a reason not related to the individual concerned", not the better known, but narrower, definition in the Employment Rights Act relating to workplace closures and the like.

Implications for Propcos

These are welcome changes for employers ; the exclusion of most fixed term contracts from collective redundancy consultation, removes the need for continuous consultation programmes where there is a high incidence of such contracts.

The reduction of the 90 day period should make such exercises easier to manage however, employers need to have regard for the fact that they remain under the legal obligation to begin consultation "in good time" according to EU law, to allow meaningful consultation to take place. Ensuring consultation is "meaningful", regardless of any set timescale, remains essential for employers and it is important not to be caught out. If it is clear because of business plans that redundancies will be needed , early consultation is advisable and the 45 day timescale should be regarded as the legal minimum.

Finally, it should be noted that the maximum protective award for a failure to consult collectively remains at 90 days pay per affected employee and is not being reduced so the penalty still remains at a significant level.

Future developments in redundancy Furthermore, the Court of Appeal will this year decide the important case of USA v Nolan which raises the issue of the "trigger point" for collective redundancy consultation. Employers are seeking greater clarity given the risk of protective awards if they get this wrong.

New ACAS Guidance

Accompanying the change, but fundamental to it, is new guidance from ACAS entitled "How to manage collective redundancies". The Guidance is not legally binding but aims to help employers understand their legal obligations and "sets out the principles and behaviours behind a good quality consultation to help employers manage collective redundancies more effectively".

Specifically, the Guidance covers the following areas:

  • when consultation should start
  • what is meant by an establishment?
  • how many employees are involved?
  • who to consult
  • what information should be provided
  • how the consultation should be conducted
  • how long consultation should last
  • when individual consultation should be carried out
  • when dismissal takes effect
  • what rights of redress exist, and
  • conducting consultations in non-standard circumstances, including business transfers and insolvencies.

The challenge of finalising the content for this new Guidance should not be underestimated, given the uncertain state of the law in some of the above areas. By way of example, there is tension over the meaning of "establishment" and whether this means, on one hand, a work location or, on the other, an entire business ( see below on recent case law ). The Guidance gives the example of a logistics company with three distribution sites across a city. The warehouse staff are assigned to particular sites, which are run as distinct entities, and the Guidance states that for them the site would be the establishment. However the drivers, although based at a particular site, are expected to work flexibly across the three sites and are managed as a single entity. For the drivers, the Guidance says, the establishment is likely to be the three sites.

The Guidance has much practical help of this nature and contains sample forms, timelines and case studies. Further, it does not restrict itself to legal principles, addressing issues such as dealing with people, including the survivors of a redundancy process.

Although ACAS faced a challenging task, the Guidance it has produced will be a helpful port of call for employers facing the trials and tribulations of a collective redundancy situation.

Recent Cases Against the backdrop of continuing economic uncertainty, there has been a steady flow of redundancy decisions from the Employment Appeal Tribunal (EAT) over the last few months. As many concern the more challenging issues around handling a redundancy situation, they are summarised below to help provide some clarification in this difficult area.

Collective consultation: what is an "establishment"?

The definition of "establishment" is a key issue when determining the scope of collective redundancy consultation. Case law guidance on correctly identifying an establishment is sparse and controversial. As a result, the judgment from the President of the EAT on the interpretation of establishment in Renfrewshire Council v The Educational Institute of Scotland is worth noting. In particular, he stated that:

  • An establishment is likely to be part of a business or undertaking, not the whole business
  • Statute uses the word "at" an establishment, which suggests a physical presence, for example, a place in or from which people are employed
  • The focus should be on identifying the unit to which the workers concerned are physically and factually assigned to perform their tasks (as opposed to, for example, focusing on where they might be required to work under a mobility clause or the place from which many aspects of their employment were controlled).
  • Any decision as to establishment is heavily factually dependent.

While helpful, this Judgment only takes us so far in clarifying the vexed issue of what is an establishment. Interestingly, the question returns to the EAT this year when judgment is given in the ongoing Woolworths' litigation.

Reduced hours was a redundancy

Seeking to agree part-time working, in order to avoid redundancy dismissals, has been a feature of the recession. As such, the EAT case of Packman v Fauchon provides timely clarification.

Due to the economic downturn and to new software, Ms Fauchon was asked to work significantly reduced hours, she refused and was dismissed. Was this a redundancy? Yes, according to the EAT. Where there is a reduced need for an employee to work full-time there may be a redundancy (a diminished requirement for an employee to carry out work of a particular kind) and it rejected earlier case law requiring a reduction in headcount as a necessary factor.

Poor performers and "trumped up" redundancies

Employers concerned about claims of "trumped up" redundancies can draw comfort from the case of Fish v Glen Golf club where the EAT confirmed that redundancy can be the reason for a dismissal, even though there is evidence of other reasons (capability, conduct).

Financial constraints caused the respondent in this case to do away with the claimant's position and he was made redundant. The claimant argued that the redundancy was a pretext for terminating his employment, reflecting hostility towards him and criticism of his abilities. The EAT endorsed the approach of the tribunal - to decide what was the principle reason for the dismissal. They decided it was redundancy, even though ancillary reasons existed.

Employers should treat this with some caution however, in that selection where there is a reduction in the number of employers doing the same job, still requires a fair selection process and selecting based on performance would need to be capable of some objective or unbiased assessment.

Determining the pool for selection

The case of Fulcrum Pharma (Europe) ltd v Bonassera is a reminder to consider the pool for selection, and to properly consult over the pool, even where first impressions suggest it is simply a matter of one role being lost and therefore a pool of one.

In this case, the employee won her unfair dismissal claim after her HR Manager post was eliminated. The employer had failed to consider whether the one HR employee remaining, that of HR Executive, should be included in the pool for selection and failed to consult on the pool.

The pool should include all those employees carrying out work of a particular kind, but may be widened to include other employees such as those whose jobs are similar to or interchangeable with those employees. When considering whether subordinate employees should be included in the pool, the EAT set out the following factors:

  • Whether or not there is a vacancy;
  • How different the two jobs are;
  • The difference in remuneration between them;
  • The relative length of service of the two employees;
  • The qualifications of the employee in danger of redundancy.

In addition, during the consultation process, it should be determined whether the more senior employee would be prepared to consider the more junior role at the reduced salary.

Enhanced redundancy payments terms in staff handbook could be contractual

Some employers have agreed redundancy policies making provision for enhanced redundancy payments. As economic conditions deteriorated, employers have been less able to countenance such payments. This has led to employees seeking to enforce the enhanced redundancy payment as a contractual term.

In Allen v TRW Systems Ltd a redundancy policy, containing provision for enhanced redundancy payments, had been formally agreed with a works advisory council and a promise was added to the employee handbook to implement the redundancy policy in the event of redundancies. This promise was repeated in correspondence and payments based on the policy were made in respect of redundancies over an eight year period. Unfortunately, while the EAT decided that elements of the employee handbook could be contractual, it remitted the issue of the enhanced redundancy payment to a new tribunal. However, in so doing, the EAT set out the key factors to be considered when approaching this difficult issue, which include:

  • Whether the policy was drawn to the attention of employees
  • Whether it was followed without exception for a substantial period
  • The number of occasions on which it was followed
  • Whether payments were made automatically
  • Whether the nature of communication of the policy supported the inference that the employers intended to be contractually bound
  • Whether the policy was adopted by agreement
  • Whether employees had a reasonable expectation that the enhanced payment would be made
  • Whether terms were incorporated in a written agreement
  • Whether the terms were consistently applied.

Finally, the EAT instructed tribunals to scrutinise with care arguments by employers that enhanced redundancy payments, which had previously been promised and communicated, were now merely matters of policy and discretion.