Making cuts without bruises

first_img Previous Article Next Article Comments are closed. Related posts:No related photos. Making cuts without bruisesOn 1 Dec 2001 in Personnel Today Britishbusinesses fear continental-style consultation will impede their ability to actquickly when the commercial need arises. But existing UK consultation laws arealready some of the toughest to work with- and treating them as an annoyingformality could do damage, warns Christopher MordueAsbusiness headlines are dominated by announcements of large-scale job cuts andunion complaints of non-consultation, controversial proposals are beingdeveloped in Europe which would give workers greater consultation rights inadvance of redundancies, restructurings and other major business decisions. UKbusiness leaders fear the introduction of “continental style”obligations requiring worker participation in business planning, under which decisionstaken without consultation would be void. The much publicised difficulties ofMarks & Spencer’s closure of its French stores are cited as an example ofhow such rules could impede swift business responses to adverse economicconditions.Thedraft directive is a long way from being European, let alone UK, law. In themeantime, the impact of existing rules on collective redundancy consultation –under section 188 of Trade Union and Labour Relations (Consolidation) Act 1992– should not be underestimated. The sanctions for non-compliance are among themost draconian in UK employment law. At a maximum of 90 days’ pay per affectedemployee, protective awards can run into many hundred thousand pounds. Manyemployers do not fully appreciate the extent of the obligation to consult (seebox “What is consultation”) or regard it as a frustrating andinconvenient formality. Advantagesof early consultationConsultationmust begin within minimum time periods before the first dismissal takes effect.The express purpose of this rule is to delay redundancies, and allowconsultation to take place. Further delays arise because consultation can onlybegin when statutory information (see box “What information must bedisclosed?) is provided to representatives of affected employees. Where thereare no trade union representatives the employer must first of all arrange foremployee representatives to be elected, postponing the start of the 30- or90-day period. Inany event, the end of the 30- or 90-day period is not necessarily the earliestdate at which redundancies can occur. Preliminary steps before dismissal willtypically include consultation over whether redundancies should occur at all,consultation over selection criteria and alternative employment, theapplication of the selection criteria, individual consultation over redundancyselection and alternative employment, followed by the giving of notice.Employers need to take full account of each step and recognise that the processcan take considerable time if financial penalties are not to be incurred.Naturally,these problems are eased if consultation begins at an early stage.Nevertheless, many employers delay consultation until very late in theirdecision-making process. This postpones the point at which the employer can legitimatelymake the first dismissal, and makes it harder to demonstrate genuineconsultation with an open mind. A natural tendency to consult only afteralternatives to redundancy (such as part-time working or temporary lay offs)have been considered and rejected by management results in an inflexibleposition that makes consultation appear a mere formality. Itis not essential to provide all of the statutory information to employeerepresentatives at the outset of consultation. Some items may require detailedpreparatory work, in particular selection criteria and any enhanced redundancyterms. The first issue for consultation is always whether redundancies arenecessary at all or in the numbers proposed. So employers could beginconsultation on these issues and provide the remaining information at a laterdate.Successfulconsultation is a resource – and a time-intensive operation. It requires thebacking of managers and HR including detailed communications to announce theredundancies (including external announcements to customers and the DTI) and toexplain the proposals to affected employees, organising the election ofrepresentatives and collating information. Take care that the proposals are notannounced as a “done deal”. As the consultation process unfoldsemployees should be advised of the progress and outcomes of consultation. Itcan be particularly important to communicate directly and regularly withaffected employees, rather than leaving it to elected or trade unionrepresentatives. With large-scale redundancies or site closures, employers mayneed to arrange retraining to enable employees to be redeployed internally orassist with finding alternative employment – or organise job fairs to putemployees in touch with prospective employers. EmployeerepresentationInthe absence of a recognised trade union for affected employees, you mustarrange for the election of employee representatives. There are specificstatutory rules for these elections which go beyond the simply procedural. Youmust ensure that affected employees are adequately represented. The key issueis whether the affected employees should elect representatives as one group, orwhether a number of smaller “constituencies” should elect their ownrepresentatives. This latter approach may be particularly appropriate if arange of employees are affected in different ways, or to ensure that thesegroups are properly represented. If affected employees elect representatives asa single group, the outcome may leave some effectively unrepresented.Thereare opportunities here to maximise the efficiency of the consultation process.Where different types of employees are affected at the same establishment,there will inevitably be some issues that are not of common interest. Forexample, selection criteria may differ, at least in detail, between differentredundancy pools. It may, therefore, be useful to be able to consult separategroups simultaneously on specific aspects of the proposals, streamlining theconsultation process and ensuring that consultation is directly targeted foreach group.Thereis no prescribed ratio of representatives to affected employees. The numbersshould be dictated by the consultation structure you wish to achieve. Thegreater the number of representatives, the greater the flexibility to set upspecific sub-committees to work on a number of issues simultaneously. It isalso advisable that at least two or three representatives from each groupshould be elected, to avoid the need for further elections if a representativeleaves (such as through voluntary redundancy).VoluntaryredundanciesOnemethod of implementing redundancies within the consultation period is to invitevolunteers. This is usually desirable in any event to reduce the need forcompulsory redundancies. Employers will typically offer more generous terms tovolunteers and impose a time limit for applications. Though in theory even avoluntary dismissal inside the period for consultation will be a breach ofsection 188, the risk of a significant protective award is small, particularlyif representatives agree to an early leaving date.Considervery carefully the details of any voluntary redundancy scheme. Will it be openonly to affected employees, to reduce the need for selection? Will it beoffered to unaffected employees to create re-deployment opportunities? If so,will acceptance be conditional on an affected employee taking up the role? Ifnot, the additional dismissals may cause the employer to exceed the number ofproposed redundancies, affecting the length of the consultation period. Whencan the employer dismiss?Dismissalsmust not “take effect” during the consultation period. This refers tothe actual termination of the employment contract.  Consequently, you can give notice of dismissal during the 30- or90-day period. But be cautious about the timing of redundancy notices:consultation – at least over whether and how redundancies should occur – cannottake place after notice is given. Notice should only be given during thisperiod where it has been agreed with representatives or where consultation hasbeen exhausted without agreement being reached. Note also that individualconsultation will be required, particularly over selection for redundancy andalternative employment, before notice can be given.Canthe obligation be avoided?Asbox “Size matters” indicates, the key to the application of section188 is the number of redundancies proposed by a particular employer at aparticular establishment within any 90-day period. If redundancies are keptbelow 20 in any 90-day period, the obligation to consult does not arise. Wherethe numbers to be dismissed at the particular establishment are kept below 100,a consultation period of 30, rather than 90, days applies. If there iscommercial flexibility as to where redundancies are required, it is possible tomanipulate the scale of proposed redundancies to your advantage – spreadingredundancies over time, between different employers or different establishments– to avoid or limit the requirement to consult. Butoutright avoidance of the consultation obligation, where it applies, isdifficult and dangerous. The defence of “special circumstances” isvery hard to establish. Not only must these circumstances render consultationnot reasonably practicable, they must be “special”, that is, out ofthe ordinary. Even where special circumstances do exist the employer is notexcused entirely from its obligations, but must take such steps as arereasonably practicable towards compliance.Staggeringredundancy proposals can minimise the extent of consultation. When calculatingthe numbers of proposed dismissals, redundancies in respect of whichconsultation has already begun are discounted. An employer already consultingover 20 redundancies could propose another 99 within the same 90 day periodwithout triggering a 90-day consultation period. Deliberately staggeringredundancy announcements in this way, however, is highly dangerous. If theemployer is found to have envisaged 119 redundancies all along, it will bevulnerable to a protective award.Whilelarge-scale redundancies will always face opposition, genuine consultation willat least soften the blow by explaining the basis for the decision. Employersshould also keep one eye on the morale of their remaining workforce – pushingredundancies through without consultation may send a very negative message andlead employees to vote with their feet.   ChristopherMordue is an associate at Pinsent Curtis BiddleWhatis consultation?–Consultation must always cover ways and means of avoiding redundancies,reducing their number, and mitigating their consequences–Employers cannot argue that consultation would have made no difference–Consultation must be undertaken with a view to reaching agreement, althoughactual agreement is not required–Consultation must be undertaken with an open mind, before an irrevocabledecision is taken and while proposals are still at a formative stage–Sufficient information must be provided to allow those being consulted toproperly understand the proposals and reasons for them–”Redundancy” means any dismissal which is not for a reason relatingto an individual employee–Dismissal includes the termination of any contract of employment and the expiryof fixed-term contracts without renewalWhatinformation must be disclosed?Consultationbegins by providing the following information to representatives–A statement of the proposed dismissals and the reasons for them–The numbers and descriptions of employees for proposed redundancy and the totalnumber of employees of those descriptions employed at that establishment–The proposed method of selecting employees for dismissal and the proposedmethod of carrying out the dismissals, with due regard to any agreed procedure,including the period over which the dismissals are to take effect–How non-statutory redundancy payments will be calculatedTheDTI must also be informed of the proposed redundancies, using form HR1. Failureto notify is a criminal offenceSizematters: how the obligation is triggered–Consultation is required where an employer proposes to dismiss 20 or moreemployees as redundant at one establishment within 90 days or less–In the case of 100 redundancies or more, consultation must begin at least 90days before the first dismissal–Otherwise consultation must begin at least 30 days before the first dismissal–Each group company is a separate employer–Each geographical location is usually, though not always, a separate”establishment”last_img