The Government has today confirmed its intention to change the way employers consult workforce representatives during large-scale redundancies, including by reducing the 90 day consultation period to 45 days. The changes will come in to force in the Spring.
Earlier this year, the Government consulted over the collective redundancy consultation regime set out in the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). Against a background of concern that the current rules do not fit the economic climate, it criticised what it saw as an arbitrary trigger of 90 days’ consultation where 100 or more redundancies are contemplated. That consultation closed on 19 September 2012 and the response has been published today.
Revising the Consultation period
Currently, section 188 TULRCA requires an employer to inform and consult with trade union or other elected employee representatives where it is proposing to make 20 or more employees at one establishment redundant within a period of 90 days or less. Consultation must begin no later than 30 days, where between 20 and 99 redundancies are proposed, or 90 days, where 100 or more redundancies are proposed, before the first dismissal takes effect.
Although consultation duties emanate from Council Directive 98/59 relating to collective redundancies, the Directive contains a 30 day timescale. As such, the current UK provisions “gold plate” EU requirements. Consequently new minimum periods under consultation were:
- 30 days for all collective redundancies; or
- 45 days for planned redundancies of 100 or more employees.
Today the Government reveals it has decided to opt for the latter option.
Fixed term contracts
The government plans for reform include excluding fixed-term contracts from collective redundancy agreements when they when they expire at the end of their agreed term. Fixed term contracts and their expiry cause particular problems for the education sector, and mean that many education institutions engage in rolling consultation processes in order to comply with the current consultation obligations. This step is intended to alleviate those problems and is possible because Directive 98/59 excludes fixed term contracts from its scope.
The Government has also confirmed that ACAS will produce non-statutory guidance to address key contentious issues in the consultation process. It is proposed the guidance will cover the following areas:
- when consultation should start
- who the consultation should cover
- who should be consulted
- what should be discussed
- how the consultation should be conducted, and
- when consultation can be considered complete.
It will also provide guidance on the interpretation of “establishment”, given current tensions over whether this means, on one hand, a work location or, on the other, an entire business.
Unclear and, sometimes, conflicting case law exists in this area, which adds to confusion, leads to costly litigation and delays to business decision-making. However, ACAS will inevitably face a challenging task if it is to succeed in providing meaningful and authoritative guidance in this area.
Reaction to today’s announcement will be mixed, with many employers disappointed that the government has not gone further and reduced the consultation period to 30 days for all collective redundancies. A two tier consultation process necessarily produces a more complicated and unwieldy process than the alternative of a 30 day minimum period for all collective redundancies.
Nonetheless a reduction in the consultation period will generally be welcomed. When we surveyed clients on shortening the 90 day redundancy consultation period, it received overwhelming support with three-quarters of the respondents in favour. There was widespread belief that it can stretch out unnecessarily the uncertainty for employees and can inject excessive delay at a time when employers may need to act with urgency to sustain a business.
Regardless of the period chosen, 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.
Finally, today’s consultation response relates to redundancy consultation only. How the current regime interacts with TUPE legislation will be the subject-mater of future debate but consultation time-scales in a transfer scenario are not affected by today’s announcement.