Redundancies and transfers
The problem
The owner of a struggling chain of three restaurants decides to cut his losses and concentrate on his most profitable branch in Leeds. He decides to close the restaurant in Manchester (making all 23 staff redundant) and sell the restaurant in Liverpool to a rival chain. The owner does not recognise any trade union and has no employee representatives. What obligations has he to consult with his staff?
The law
Where an employer proposes to make more than 20 redundancies in a period of 90 days or less, it is required to consult "in good time" with the representative(s) of any employees who may be affected. The consultation must be carried out with a view to reaching agreement and must cover possible ways of avoiding the dismissals, reducing the numbers of employees to be dismissed, and mitigating the consequences of the dismissals.
Consultation must begin at least 30 days before redundancies take effect (90 days if 100 or more employees are to be dismissed).
Information and consultation obligations also apply when an employer decides to transfer a business, or part of one, to a new owner. In this situation, however, the obligation applies no matter how many employees are affected by the transfer, and the legislation specifies no minimum consultation period.
Where an employer recognises a trade union, it must inform and consult officials of that union. If there is no recognised union, the employer must inform and consult other representatives of the employees affected. These may be either existing representatives or new ones elected specially.
When holding an election for such representatives, the employees must have sufficient time to nominate and consider candidates - and, where possible, the voting should be by secret ballot. All employees affected must be able to vote, and the votes must be counted accurately.
Even if a union is not involved, employers should be aware of a recently introduced statutory procedure through which trade unions can obtain recognition against an employer's will if that is the wish of a majority of the workforce.
In the slightly longer term, there will be greater burdens on employers in this area, on account of a new European Union Directive on information and consultation passed earlier this year. This will expand the range of matters on which staff have a right to be consulted, and will probably require employers to have standing works councils rather than representatives elected ad hoc.
Expert advice
In the example given, the owner will need to consult about the redundancies in Manchester and the business transfer in Liverpool. He does not already have elected representatives and does not recognise a trade union, so he will need to organise elections.
As there are 23 employees at Manchester, the owner will have to start consulting at least 30 days in advance of the redundancies. There will be no specific timeframe for consultation in Liverpool, but in both locations the owner must ensure that representatives are elected in good time.
In the elections, the owner must ensure that all affected staff are represented and are all able to vote (even those who are absent). Once elected, representatives must be given access to staff and allowed appropriate facilities (such as a phone, PC and photocopier). Elected representatives have the right to reasonable time off with pay during normal working hours to carry out their duties.
Check list
- Make sure employee representatives are fairly elected in sufficient time for proper consultation on planned redundancies or a proposed business transfer.
- Start consulting in good time and stick to the required 30-day timescale for redundancy consultation (or 90 days if applicable). Conduct consultation in good faith, and with a view to reaching agreement with the representatives.
- Allow employee representatives reasonable access to staff, provide necessary facilities, and pay them for time spent carrying out their duties.
Contact
Lucy Carter
Lewis Silkin
lucy.carter@lewissilkin.com
020 7074 8000
Beware!
Failure or refusal by an employer to consult means that the employee representatives can complain to an employment tribunal. The tribunal will award compensation of as much as three months' pay for each employee affected unless the employer can show that there were "special circumstances" that meant it was not reasonably practicable to consult. This, though, is very difficult to prove.
Note also that employees may succeed in claiming unfair dismissal if selected for redundancy without consultation, leading to a compensatory award of as much as £52,600 on top of any redundancy pay entitlement.
