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Collective Redundancies & Proper Consultation

A recent decision of the UK Employment Tribunal serves as a reminder to advisors in the corporate restructuring process (such as liquidators, receivers and examiners) of the obligation to consult with employees when faced with a potential collective redundancy situation.

The Employment Tribunal in USDAW, Unite the Union, Wilson v WW Realisation 1 Limited (In Liquidation) made protective awards to the value of £67 million in favour of employees made redundant following the demise of Woolworths. Essentially, the Tribunal held that the administrators failed to adequately consult with employees’ representatives regarding collective redundancies.

According to the Tribunal, a genuine and open-minded consultation should::

  • Occur when the collective redundancy proposals are still at a formative stage
  • Provide adequate information to which to respond and adequate time in which to do so and
  • Involve a conscientious consideration of the response received from the employees’ representatives

The single one hour meeting held with the employees’ representatives was found by the UK Tribunal not to be sufficient consultation.  The Tribunal took the view that the approach of the administrators was more of an announcement of what would happen rather than of genuine and meaningful consultation. The administrators had already come to the view that, in the absence of sales of any stores as going concerns, closures were inevitable. In this regard, the Tribunal emphasised that the fact that an employer may consider consultation to be futile does not excuse a failure to consult. In addition, the perilous financial situation in which the company found itself, and the fact of administration, did not excuse the administrators’ failure to fully comply with the obligation to consult.

While the decision is not binding in this jurisdiction, it is likely to be persuasive before the tribunals here.  Accordingly, advisors in the corporate restructuring process should be mindful of the obligation under the Protection of Employment Act 1977 to hold genuine and meaningful consultations with employees at the earliest opportunity and in any event at least 30 days before the first notice of redundancy is given in a collective redundancy scenario.

Consultations must include a discussion of the following:

  • The possibility of avoiding the proposed redundancies, reducing the number of employees affected by them or mitigating their consequences and
  • The basis on which it will be decided which particular employees will be made redundant

The employer must supply the employees or their representatives with all the relevant information relating to the proposed redundancies such as:

  • The reasons for the proposed redundancies
  • The number and descriptions or categories of employees whom it is proposed to make redundant
  • The number of employees and description of categories normally employed
  • The period during which it is proposed to effect the proposed redundancies
  • The criteria proposed for the selection of the workers to be made redundant and
  • The method of calculating any redundancy payments other than statutory redundancy payments.