Employers should be aware of the potentially serious financial consequences of failing to consult when making collective redundancies.

If an employer is proposing to make redundant 20 or more employees at one establishment within a period of 90 days or less, the collective consultation provisions of Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) come into play. Where the employer is proposing to dismiss 100 or more employees, the consultation period must be at least 90 days; otherwise it must be at least 30 days. Failure to consult with the appropriate representatives of affected employees can lead to a protective award requiring the employer to pay each affected employee 90 days’ pay. Even if the obligation to consult is for a minimum 30-day period, a serious breach of the requirement can result in employees being granted a 90-day protective award.

Genuine efforts to consult must be made – merely keeping employees informed does not fulfil this duty. Consultation of the required duration must take place before any employees are given redundancy notices. Consultation must be meaningful, with a view to reaching an agreement. If the decision to dismiss employees has already been taken, it effectively compromises the consultation process.

In addition, in a collective redundancy situation, the employer has a statutory duty to notify the Secretary of State for the Department for Business, Innovation and Skills before giving notice to terminate an employee’s contract. If an employer fails to give the required notification, the Secretary of State may institute legal proceedings that could lead, on summary conviction, to a fine of up to £5,000.

The obligation to consult over avoiding proposed redundancies extends to consultations over the reasons for the closure of a business. Where it is recognised that dismissals will inevitably, or almost inevitably, result from closure, dismissals are proposed at the point when the closure of the business is proposed. Where closure and dismissals are inextricably linked, the duty to consult over the reasons for the closure arises.

Collective consultation does not replace the need to consult with individuals who may be made redundant in order for any subsequent dismissal to be fair.

It is important that employers are aware of this requirement to consult at an early stage in the decision-making process. Making employees redundant always requires care and advice should be sought as soon as redundancies are contemplated. Restructuring a business, even where staff may not actually leave your employment, also carries with it potential risks. Care must always be taken where fundamental changes are made to employees’ jobs. We can help ensure that a proposed redundancy programme or the restructuring of your business is carried out with the minimum risk of unanticipated financial consequences.

As part of its ‘Red Tape Challenge’, the Government recently carried out a consultation exercise on whether the current 90-day minimum consultation period where more than 100 redundancies are contemplated can be reduced.