Large scale redundancies, by no means unknown pre Covid19, have featured heavily in recent months. Employers who propose to make collective redundancies are subject to stringent legal requirements which originate from EU legislation and which, at least for the time being, continue to apply unchanged despite the UK’s departure from the EU.
Briefly, an employer who proposes to make 20 or more redundancies within a period of 90 days must collectively inform and consult with its workforce, as well as inform the Insolvency Service in advance of carrying out its plans (using from HR1). Failure to meet the former duty can result in an award of 90 days’ gross pay per affected employee. Failure to meet the latter duty without justification is a criminal offence which may result in prosecution and/or fine for the employer and, potentially, any of its officers.
Despite some mismatch between the UK’s and EU’s legislation, these duties have been understood and interpreted by the UK courts to be forward-looking. This meant that if an employer made 10 employees redundant one month and then proposed to make 10 more employees redundant the following month, it only had to consult with the second batch of employees and only had to inform the Insolvency Service once it had made the second proposal.
A recent judgment of the European Court puts an end to this.
At the end of last year, the European Court held that, to properly protect employees, the law must be understood as requiring employers to look both backward and forward and take into account redundancies within any period of 90 consecutive days, whether backward or forward looking.
The practical effect of this decision is yet to be fully understood. Strictly speaking, however, an employer is now expected to collectively consult about redundancies which have already occurred if, within the 90-day period surrounding of these dismissals, additional redundancies are made with the total exceeding 20. In addition, form HR1 will have to be submitted to the Insolvency Service referring back in time to the earlier redundancies.
It remains to be seen how employers are to comply with these duties in relation to employees who already departed the business and to what extent they may rely on the statutory defence of special circumstances. The factual circumstances of each case will need to be closely examined and assessed. At this point, it is more important than ever to implement timely consideration of all relevant plans, present and future, as well as possible risks, before taking any action to implement such plans.
For specific advice, please contact Helen Boddy or Michal Stein.