NEW LEGISLATION & EMPLOYMENT LAW: Employers Have a Duty of Responsibility to Staff; Faced with an Economic Downturn and Increased Pressure on North East Businesses, Tony McPhillips, Partner and Head of the Employment Services Group at Muckle LLP, Considers the Duties and Responsibilities Owed by Employers When Considering Redundancies in the Workforce
WHEN America sneezes, we catch a cold, so the saying goes. What began with a housing slump in the US in spring 2007 developed into a global liquidity crisis in late summer and has now resulted in turmoil in global financial markets. The shock of the Northern Rock collapse is still reverberating around the UK economy and business and consumer confidence has been severely dented.
Mortgage lenders have tightened their belts and Britain's construction industry is being hit by the housing market slowdown, with growth in the sector at its lowest level for 12 years. The Chartered Institute of Personnel and Development has warned that 2008 will be the worst year for employment since Labour came to power in 1997.
Many businesses are having to fight for survival. As so often happens in periods of economic downturn, employers' budgets are squeezed and organisations need to re-organise and restructure in order to ensure they remain competitive in an ever tougher commercial environment. In many cases compulsory redundancy programmes will be implemented.
Employers have a duty under section 188 (1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULCRA) to consult with employee representatives where they are proposing to make more than 20 redundancies within a 90-day period. This is called collective consultation and exists in addition to the duty to consult with individuals whose jobs are at risk of redundancy (individual consultation).
An employer proposing to make this many redundancies is required to consult in advance with representatives of the affected employees, and to notify the projected redundancies to the Secretary of State using an HR1 form. If there is a collective agreement in place collective consultation will generally take place with the recognised trade union. The minimum consultation period where 20 or more employees are proposed as redundant is 30 days and where over 100 employees are at risk this rises to 90 days. Consultation must be completed before any notices of dismissal are issued to employees.
It is advisable to have a timescale and outline agenda for the consultation process. Meaningful consultation must address issues such as the need for redundancies, avoiding dismissals, reducing the numbers to be dismissed and mitigating the consequences of dismissals.
The penalties for failure to comply are severe. An employment tribunal can make a protective award to each employee of up to 90 days' full contractual pay - this award is in addition to any compensation payable for a successful unfair dismissal claim. …