Collective redundancy situations and claiming a protective award

In this article Christine Peacock looks at the law on collective redundancy situations and what employees can do if an employer gets it wrong.

Advisers will be familiar with advising clients about their redundancy rights, whether these relate to:

• checking if there is a genuine redundancy situation
• unfair dismissal issues such as whether there has been an unfair selection for redundancy
• claiming a redundancy payment, or
• thinking about insolvent employers and their liability towards redundant employees.

Here the focus is generally on the specific definition of redundancy found in s139 of the Employment Rights Act 1996.

However, as the economic consequences of the Covid 19 pandemic continue to be felt, more employers are making large scale redundancies. Here there are special legal duties on the employer to follow collective redundancy procedures. Where employers don’t follow the rules, employees have specific claims for compensation under section 188 of the Trade Union & Labour Relations (Consolidation) Act 1992 ((TULR(C)A)

The definition of a collective redundancy situation

Section 188(1)of TULR(C)A states that:

‘………where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals’.

Firstly, it’s important to be aware that the duty is to consult with all those affected by the proposed dismissals, and not just with those whose jobs are directly at risk.

Secondly, these requirements only apply to the proposed dismissal of ‘employees’, and not the wider category of ‘workers’ (and some other groups excluded from the definition of ‘employees’).

Thirdly, TULR(C)A also uses a different definition of redundancy than ERA 1996. S195 defines a redundancy dismissal as any dismissal which is for ‘a reason not related to the individual concerned’.

There are then three main duties on an employer:

• To provide certain information
• To consult
• To notify the Secretary of State in the Department for Business, Energy and Industrial Strategy (BEIS) in advance (using form HR1).

When is an employer ‘proposing to dismiss’?

It may not always be clear when an employer is ‘proposing to dismiss’ employees and within what period.

Case law has helped with this to an extent by deciding that ‘proposing to dismiss’ means something less than that a decision to make redundancies has already been taken, but something more than a mere possibility that they might occur. This will be before any notices of dismissal have been issued, and so employers need to make sure the consultation takes place first.

The number of employees the employer is proposing to dismiss

The right to collective consultation depends on how many employees the employer is proposing to make redundant. If the proposal is to dismiss 100 or more employees, the consultation must begin at least 45 days before the the first of those dismissals takes effect, and if the proposal is to dismiss 20 or more (but fewer than 100), the consultation must begin at least 30 days before the first of those dismissals is due to happen. But these are only minimum periods and the consultation should start ‘in good time’, as the purpose is for meaningful consultations to take place, and to look for agreed solutions to the problems posed by the redundancy situation.

How do you determine the number of employees affected to meet the trigger for collective consultation?

The numbers involved may not always be clear. They need to include, for example, people volunteering for redundancy and (in most circumstances) those being redeployed. TULR(c)A 282(2)) excludes people on fixed-term contracts from the numbers counted where their employment is going to terminate by the predetermined end date of the fixed term — they are included if the redundancy proposal would mean early termination of their fixed term.

At the same ‘establishment’

Collective redundancy procedures are only triggered where the numbers of employees are more than 20 or 100 at an ‘establishment’. Numbers of employees located at different establishments of the same employer are not added together.

The case of USDAW v Ethel Austin (relating to the redundancies in the closure of the store chains Ethel Austin and Woolworths) went all the way to the European Court of Justice (ECJ). It was held that not all redundancies across an employer’s business need to be counted, and only the numbers affected by redundancy at the place where an individual works are included. What this means in practice is that even if an employer is going through a big, national redundancy programme, if fewer than 20 people work at the client’s place of work (such as an individual shop within the company) then the collective redundancy obligations on employers do not kick in for those working in those smaller workplaces.

However, if employers are making people redundant, where an establishment has fewer than 20 employees an employer must still have individual consultations about redundancy and go through a fair process.

Who must be consulted, and when — the procedure

Once the conditions are met to trigger a collective redundancy the employer is required by law to follow the proper collective consultancy process.

In terms of who must be consulted, the employer has to inform and consult with all the ‘appropriate representatives’ of certain categories of ‘affected employees’ (defined broadly).

This starts with consulting with trade union representatives (where there is a recognised union), or with other employee representatives if there is no union (including making arrangements for representatives to be elected). These must then receive information and be consulted on behalf of the different categories of employees affected.

But before any consultation starts the employer has to provide certain key information to these representatives. This includes:

• the reasons for the proposals
• the number and description of employees the employer is proposing to make redundant
• the number of employees employed by the employer at the establishment
• how people will be selected for redundancy
• how the redundancies will be carried out, including the timeframe for this
• how redundancy payments will be calculated
• the number of agency workers working temporarily for and under the direction of the employer, where they work and the type of work they are doing.

Why is the law around collective redundancies important?

The law is important for advisers to understand because, of course, clients are entitled to be consulted when they are affected by a mass redundancy situation, particularly in such difficult economic times, and they need to know about their rights. But, significantly, where employers fail in their collective redundancy consultation obligations, clients may have quite valuable claims to bring in an employment tribunal, in addition to other claims like unfair dismissal or for a redundancy payment.

In cases where clients can show that their employer did not inform and consult ‘appropriate representatives’ in accordance with these rules they may be able to bring a claim for a protective award, claiming a breach of s188.

The value of this depends on what a tribunal decides is ‘just and equitable’ depending on the extent of the employer’s failure, and other factors, but can be up to 90 days’ gross pay.

These claims must be brought within a three month time limit, ending with three months from the date on which the last of those collective redundancy dismissals takes place. As with most other employment tribunal claims, the first step is to register for Acas Early Conciliation within that period.

Who can bring a claim for a protective award?

Advisers need to understand who has ‘standing’ to bring a claim for a protective award.

If there is a recognised trade union then it is the union who has the right, or standing, to bring the claim on behalf of the affected employees it represents.

If there is no union, but the employer arranged for employee representatives to be elected, but then failed in the consultation in some way, it is those employee representatives who can bring the claim.

It is only where the employer failed to consult if there was no union (covering the group of employees the client belonged to), and no other elected representatives, that the individual client has the standing to bring their own claim claim (for example, that the employer failed in the arrangements for election of representatives, or to consult about redundancies).

It is therefore likely that the focus for advisers will be on assisting clients who are not union members, as a trade union would normally be pursuing claims on behalf of its members, on the basis that either it had the right to be consulted, or as a benefit from union membership where the union to which someone belonged was not recognised by the employer.

Where individuals have standing, each individual must submit their own claim and one client cannot claim on behalf of many others (although a tribunal is likely to link them and arrange for them all to be heard together). However, it is possible for a group claim to be submitted, where the circumstances are the same for a number of redundant employees, using one ET1 form, a lead claimant and attaching a schedule of other named claimants included within that claim. [See separate piece from adviser Martin Jackson on bringing a multiple claim]. It is the tribunal that decides which groups of employees are then covered by any award made. This can be a complex area where more specialist advice may be needed.

Where a union has standing but the client was not a member or doesn’t know if there was a recognised union

It can also be a difficult situation for clients if they worked at a workplace where there was a recognised union, but when the client was not a member, or when the client does not know if there was a recognised union. This means the union has the standing to bring the protective award claim, and the client cannot do so; yet the union has no obligation towards the client, for example to keep them updated about the progress of the claim (or even whether such a claim has been submitted). There is frequently no simple or standard advice that can be given to clients in these circumstances, but the following can be useful options to consider.

Firstly, if there is any doubt as to whether a claim has been lodged on behalf of a group of workers, the client could take the protective step of lodging their own individual claim with a tribunal for the failure to consult. If it is the case that a union has started protective award proceedings, the tribunal should normally write to the client, most likely informing them that their claim cannot be accepted and may be dismissed if the claimant does not have standing to lodge such a claim. This will normally give the client a claim reference number for the union’s protective award claim, which the client can then use to make regular enquiries of the tribunal about progress.

Similarly, if the client knows, probably from other former colleagues, that the union has lodged a protective award claim, they can ask colleagues for reference details of that claim and, again, use that to correspond with the tribunal, asking to be updated as an interested party (or they can ask colleagues for a contact at the relevant union and approach them for information and ask to be kept updated). In the event that an award is made by the tribunal it is made in favour of all employees within the bargaining group covered by the agreement, whether those individual employees are union members or not, and so the employer should pay the award to the client alongside union members. Similarly, if it is an insolvency situation, the Secretary of State will pay any award due to all employees within the group, irrespective of union membership (see below for further details about bringing claims against insolvent employers).

The other situation to be aware of is if the client works at a workplace where there is a recognised union for one group of workers, but the client falls into a different group not covered by any recognition agreement (for example, by being a manager). The client will need to appreciate that, in these circumstances, they may need to bring their own claim for the failure to consult, as they would not be covered by any claim brought by a union recognised for another group of workers. In practice, it is likely that the claims would all be listed by a tribunal for hearing together, and claimants in these circumstances often do not have to do much (providing the failures to consult were essentially the same for all groups of workers), other than keep in touch with the tribunal, as they can ‘piggy-back’ on the arguments and legal submissions made by a union and its legal representatives. However, a tribunal sometimes mistakes claims submitted individually by these types of claimants, rejecting them on the basis that a union has the standing to claim and has already done so. Claimants need to check tribunal correspondence carefully and respond promptly to ensure they do not mistakenly agree to dismissal of their claims when they actually need to lodge them individually.

If an employer then fails to pay the protective award made (for example awarding anything up to 90 days’ pay), affected clients (including, in this case, union members) would then need to bring a further tribunal claim within 3 months of the failure, to enforce the award.

Special circumstances defence

Employers do have a defence they can use when claims for a protective award are made, which is called a ‘special circumstances’ defence. Here employers have to be able to show that it was ‘not reasonably practicable’ for them to comply fully with their information and consultation obligations. But advisers will want to be aware that the tribunal has defined ‘special circumstances’ quite narrowly and so something really exceptional or out of the ordinary needs to have happened to excuse an employer failing to follow the rules. Employers may often be making large-scale redundancies because of financial difficulties, sometimes leading to insolvency. But the courts have found that insolvency alone is not a ‘special circumstances’ and is actually fairly common, and so there would have to be something more significant or unusual than this to prevent an employer from being aware of the need to plan for the possibility of collective redundancies (Court of Appeal in the case of Clarks of Hove Ltd v Bakers’ Union).

More about insolvency

Although it will often be a very worrying time for clients if it seems their employer has become insolvent and, in addition to them being made redundant, the employer may be unable to pay them money they are due (such as redundancy and notice pay), clients need to be aware that there are certain payments the government’s Insolvency Service can pay them. Further details of these can be found on the gov.uk website pages dedicated to ‘Your rights if your employer is insolvent’:

https://www.gov.uk/your-rights-if-your-employer-is-insolvent

Insolvency practitioners should be appointed in these cases and should give employees information about what they are due and how to claim. If a company is in administration and clients want to bring employment tribunal claims against the company, they will first need to write to and get the permission of the administrators to proceed with the claims. This can sometimes mean clients will need to lodge protective award claims to meet time limits, but claims then being put on hold for long periods whilst administrators undertake their tasks, with the tribunal being updated periodically.

If employees (or their representatives) bring claims in an employment tribunal for a protective award for a failure to consult about collective redundancy, and succeed with getting an award made, this is one of the payments that the Insolvency Service can make if the employer has become insolvent and is unable to pay. Further information about the steps involved and limits on what the Insolvency Service can pay can be found in the Insolvency Service’s guidance on ‘Explaining Your Protective Award’: https://www.gov.uk/government/publications/explaining-your-protective-award/explaining-your-protective-award.

This is a very valuable back-up for clients and advisers need to be aware of this. However, it is important for clients to understand that this only applies in a genuine insolvency situation and the government scheme will not pay a protective award if an employer simply closes and fails to pay.

Conclusion and further resources for advisers

It is acknowledged that these claims will not be suitable for many advisers to run, as circumstances and capacity within local offices will vary. But it is worth advisers being aware of the possibility of these claims, particularly as increasing numbers of businesses make redundancies or become insolvent, so that clients can be advised appropriately.

Martin Jackson, a Specialist Advice Manager at Citizens Advice Cornwall, has successfully run a protective award claim for a group of clients and in the accompanying article he explains what was involved and provides some template resources to be adapted and used by advisers able to take on a claim.

Christine Peacock is an Employment Expert in the Expert Advice team at Citizens Advice

The information in this article is correct as of the date of publication.

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