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Consultation on collective redundancies: time for an HR reality check

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On 21 June 2012, the Government commenced consultation on whether to reduce the minimum period for collective redundancy consultation from 90 days to 30, or 45 days in cases involving 100 or more redundancies. The consultation will close on 19 September 2012.

Many employers will not even be aware of this consultation, not because the issue is not important, but few employers are really engaged with the collective consultation process. Principally, this is because the collective consultation regime does not reflect the reality of modern corporate decision-making, particularly redundancy decisions in a recessionary market. Although it seems sensible for the Government to be looking at reforming this area of the law, the proposed reforms do not go far enough and a more radical approach is needed.

Complexity of the law

The law is too complex and needs to be simplified. Employers often do not understand the law in this area and routinely need legal advice on issues such as when the obligation to consult is triggered, when to start consultation, what information must be provided to the employees' representatives, how to facilitate the election of employee representatives and how to coordinate the individual consultation exercise that must run concurrently with or following the collective redundancy exercise.

Consultation periods too long

Mandatory consultation periods prevent employers being able to take and implement decisions within a timeframe suited to the commercial necessities of their businesses. Further, there are cost implications exacerbating the economic challenges faced by employers (eg the costs of continuing to employ employees who are later dismissed for redundancy). Employees often find the mandatory consultation periods create unwanted uncertainty and they will commonly ask employers to expedite the consultation process.

Scope of consultation is unrealistic and does not accord with the commercial needs of businesses

The law requires employers to consult before a decision is made regarding redundancies, including any business decision that would lead to redundancies. However, in many cases, it is wholly unrealistic to expect employers to consult about proposed redundancies before a decision has been made that redundancies are necessary.

Decisions regarding substantial numbers of redundancies are often commercially sensitive, and employers will wish to control the point at which such information is revealed to the market. Confidentiality agreements with the employee representatives seem an unrealistic solution to a practical problem; employers don't want a legal remedy for a breach of such an agreement, they want to ensure no information is leaked.

Particularly at times of recession, employers consider redundancies in circumstances where there is a risk to the business if no action is taken. It is simply unrealistic to expect employers, when confronted with such a pressing need, to engage in a collective consultation process. The collective consultation mechanism imposed by legislation is designed to serve an industrial relations purpose and is too blunt an instrument for most UK businesses.

The practical effect of this over-reaching approach to collective consultation is that employers often feel forced to treat the process as a procedural compliance exercise, with the result that in many cases "...the content of this consultation is quite thin... leading to a feeling that management is simply paying lip service to the provisions in the legislation and causing anxiety and mistrust among representatives" (ACAS Policy Discussion Paper, Collective consultation on redundancy).

Abolish minimum consultation periods and focus on the substance of consultation

A more realistic approach is needed. Collective consultation should be clearly restricted to the provision of information and an opportunity to seek to moderate or change the employer's redundancy decision. Employers are much more likely to engage substantively with a process that does not threaten their ability to manage the business. Employees would be protected by the fact that, if an employer were to ignore constructive and reasonable proposals in this context, they would be exposed to statutory employment claims.

The emphasis should be on the substance of a more limited consultation tailored to the particular circumstances of each case, without an arbitrarily imposed consultation period (remembering that these are not required under the 1998 EU Directive on collective consultation: Council Directive 98/59/EC). A shorter timeframe would encourage employers to engage in more meaningful and compliant consultation, which would benefit both the employer and employees.

Daniel Peyton is an employment partner in the London office of international law firm, McGuireWoods.