Until April this year, employers considering making more than 99 people redundant had to consult with unions or staff representatives for 90 days or else face draconian penalties as well as claims for unfair dismissal.
On 6 April 2013, the Government reduced this mandatory consultation period for mass redundancies to 45 days (a 30 day consultation period for redundancies affecting 20- 99 staff was preserved, unchanged), justifying it on the basis that the move would give greater flexibility to larger employers and reduce the risk that a longer process would damage morale and cause employees unnecessary stress.
While the penalties for non compliance with this shorter statutory procedure remain the same (every affected employee can claim a "protective award" of 90 days, uncapped pay in addition to other losses), unions have argued the change is "unhelpful".
Employers often feel they are stuck between a rock and a hard place when it comes to consulting with staff on large-scale redundancies. On the one hand, as mentioned above, there are big risks with failing to consult with staff in accordance with the rules and case law on the subject. For most companies, the obligation to consult is triggered earlier than they might otherwise prefer, at the time redundancies are "contemplated".
Share prices, staff morale, commercial arrangements etc. will all be affected by an announcement that more than 100 members of staff may lose their jobs, so it is easy to understand why employers might want to delay consultation for as long as possible.
During consultation it is also fair to assume that affected staff may be somewhat preoccupied with the process at hand and find it hard to give 100% commitment to their work duties. For that reason, a shorter process is probably beneficial to the employer and the employee alike, however the reality is some staff will lose out by being made redundant 6 weeks earlier than would previously have been the case.
Problems can occur for employers who "pre-select" staff for redundancy either because of assumptions made about the employees in question (usually their performance justifies their selection) or about the work that they do.
Redundancies where there has been a failure to use objective selection criteria or where the pools of affected staff have been incorrectly identified will result in the dismissals being unfair and compensation due. Of course, employees who will sue for unfair dismissal may also consider whether they have grounds to bring wider claims for discrimination or "whistleblowing" etc. They may believe these rights have been breached, or because they seek to strengthen their negotiating position in anticipation of "without prejudice" conversations.
Having consulted and selected staff to be made redundant, employers might seek to agree enhanced severance terms in return for a waiver of the employees' legal rights. This is commonplace and such agreements ("compromise agreements") are not necessarily offered to staff for reasons to suggest that the employer has something to hide. It may be the redundancies are part of a wider reorganisation or even sale of the business or part of the business which makes it critical former members of staff will not come out of the woodwork to bring employment related claims.
Employees who are offered compromise agreements need to take independent legal advice in order to ensure that the agreement is binding and the employer usually agrees to add the cost of that advice to the redundancy package on offer.
Jolyon Berry is a partner in the employment team at law firm Birketts
