Current Legal Requirements
Under current legislation, if an employer is proposing to dismiss 100 or more employees within a 90- day period, consultation must begin at least 90 days before the first dismissal takes effect (Section 188(1A), Trade Union and Labour Relations (Consolidation) Act 1992 (TULRA). Failure to observe these minimum periods (and/or failure to inform and consult properly) can result in a protective award being made against an employer by an Employment Tribunal of up to 90 days pay per employee without cap.
The Government announced before Christmas that the consultation period before large-scale redundancies can take place is to be reduced from 90 to 45 days.
The current minimum consultation period for smaller scale redundancies involving between 20 and 99 employees will remain the same, namely at 30 days.
Background for Reform
The number of redundancy related claims has jumped sharply as more businesses have felt the need to reduce workforces within a short space of time. Claims made to the Tribunal for failure to inform and consult adequately over redundancies rose 41 percent to 2,400 in the three months to June 30, 2012, compared with 1,700 in the previous three months.
In June last year, the Government launched a consultation on proposed changes to the rules on collective redundancy consultation. The consultation follows the “call for evidence” in November 2011 which sought views on the effectiveness of current redundancy law. The Government concluded that there was a strong argument for shortening the minimum consultation period and that the process is usually completed well within the existing 90-day minimum period and that this can cause unnecessary delays for restructuring.
On December 18, 2012, the Government announced plans to:
- Reduce the current 90-day minimum period, before very large scale redundancies can take place, to 45 days;
- Legislate to make clear that fixed term contracts which have reached the end of their natural life are excluded from obligations for collective redundancies consultation; and
- Introduce new non-statutory Acas guidance on collective redundancies consultation.
Draft legislation will be laid shortly and the changes are expected to come into force by April 6, 2013.
The proposals will allow employers greater flexibility to take necessary steps to restructure their business. Employers would be more able to restructure more swiftly as the minimum consultation time limit will be shortened by half for large-scale redundancies. The cost of having to employ staff for the whole of the consultation period would be significantly reduced under the proposal. However, the reforms do not remove the need for an employer to consult with employee representatives on ways to avoid redundancies. It is still necessary for employers to elect employee representatives for consultation purpose if there are no representatives or unions in place. The new 45-day period will be a minimum period, and business may consult for longer where appropriate. The proposal to remove consultation rights from fixed-term contract employees will certainly make this group of employees more vulnerable.