Redundancy: 5 key points to consider

The pandemic has led to sharp declines in client demand and deferral of projects in the professional services sector, forcing such employers to consider steps which, at the outset of 2020, might have seemed unthinkable. The Government’s Coronavirus Job Retention Scheme (CJRS) – which has recently been extended until the end of October – is providing an invaluable alternative to redundancies for many companies, but for some of the UK’s top players in the professional services sector, accepting government funding may be considered reputationally risky. Even for those firms which are utilising the CJRS, it is still only temporary, and employers should be planning their furlough exit strategies now. For some businesses, implementing redundancy procedures will be an unfortunate inevitability in the weeks and months to follow.

In the UK, where an employer is proposing to dismiss 20 or more employees at one “establishment” in a 90-day period, collective consultation obligations are obligatory. For professional services firms who are anticipating any type of workforce restructuring (including potential redundancies) in the coming weeks and months, it is vital to understand these obligations to avoid unnecessary delays, costs and legal risk. This article sets out five key points to consider in relation to collective redundancy.

1. Trigger: As stated above, employers must follow collective consultation rules if they propose to dismiss 20 or more employees as redundant at one “establishment” in a 90-day period. Case law suggests that a proposal is more than mere contemplation of the possibility of redundancies but less than an actual decision to make redundancies; however, it is not clear cut. Employers must not enter consultation with a closed mind, and proposals should still be at a formative stage. Therefore, if a firm is already of the view that multiple redundancies will be one of a number of options for it in the coming months (for example at the end of CJRS), then it is likely that there is already a “proposal” to make dismissals by reason of redundancy and the employer should commence consultation with the appropriate representatives.

2. Consultation period: The consultation must begin “in good time” and at least 30 days (or 45 days if 100 or more redundancies are proposed) before any notice of redundancy takes effect. Where this is not reasonably practicable and “special circumstances” exist, employers might be absolved from full compliance with their consultation obligations. However, while the global pandemic is unprecedented and unique, its effect on businesses is unlikely to amount to “special circumstances” and it is advisable for employers to comply, to the fullest extent, possible to avoid potential sanctions for non-compliance.

For firms who are using the CJRS, government guidance has helpfully clarified that furloughed employees are able to undertake “union or non-union representative duties and activities for the purpose of individual or collective representation of employees or other workers” without breaching furlough arrangements which prohibit employees from carrying out ‘work’ for their employer.

3. Elected representatives: The employer’s duty is to consult with representatives of the affected employees (with separate individual consultation with particular employees who are at risk of redundancy). Unless there is an existing elected employee body, or a trade union recognised by the employer, employers must arrange the fair election of appropriate representatives – which means facilitating a secret ballot, ensuring that all those eligible to vote can do so, and fair counting of votes. Many accountancy firms will be operating completely remotely at this time, with all potentially affected employees working from home while the Government guidance relating to social distancing remain in place. This presents some obvious practical issues – for example, how to conduct a fair and secret ballot online and how to conduct consultation meetings remotely. Many professional services firms (if they were not already) have become quickly adept at using virtual means of communication (eg Skype, Microsoft Teams or Zoom) in place of face-to-face meetings over the last few weeks and so will not be fazed by this. It is also helpful to know about organisations like Civica (formerly Electoral Reform Services) who provide election management services.

4. Notification: Employers are obliged to notify the Secretary of State (for Business, Energy and Industrial Strategy) on a ‘Form HR1’ at least 30 days before the first dismissal takes effect where proposing to dismiss 20 to 99 employees, or 45 days prior to then where proposing to dismiss 100 or more employees (in each case at one establishment within a 90-day period).

5. Sanctions: Failure to comply with the consultation obligations entitles all employees who are made redundant (regardless of length of service) to claim compensation of up to 90 days’ pay per person in a tribunal. This is known as a protective award. It is also a criminal offence not to comply with notification requirements, attracting a potentially unlimited fine and, where the failure is found to have been committed with the consent or connivance of, or is attributable to the neglect of, any director, manager, secretary of similar officer of a company, that individual may also be criminally liable.

CM Murray LLP partner Merrill April and associate Harriet Riddick both specialise in partnership and employment law issues for multi-national employers, senior executives, firms and partners