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Pensions Update

Is your business thinking of making redundancies this year?

Important changes to collective redundancies came into effect on 6 April 2013. These include changes to the consultation period where 100 or more redundancies are proposed, and the exclusion of some fixed term contracts from the calculation.

Changes to consultation period

Last year the Government consulted over the collective redundancy regime. The concern was the current rules did not fit the economic climate and criticisms were made of the arbitrary trigger of 90 days consultation where 100 or more redundancies are proposed.

The Directive (from which the consultation duties emanate) contains a 30 day timescale for consultation on all collective redundancies, so reference to 90 days can been seen as an example of the “gold plating” the Government is keen to eradicate.

However, instead of imposing a 30 day regime for all collective redundancies, the Government has opted to reduce the 90 day consultation for planned redundancies of 100 or more employees, to 45 days. The 30 day consultation period for all other collective redundancies will remain at 30 days. Proposals that are formulated before this date are unaffected by the change and will be covered under the old rules.

Reducing the 90 day period will allow businesses that have exhausted the consultation process to get on with running their businesses more quickly. This also has advantages to the remaining employees (often referred to as “survivors”) who can settle back into their roles more quickly. Redundancy is unsettling for the whole workforce, not just those losing their jobs and productivity often falls during the redundancy process because of the disruption.

Please note this change will not affect the ability of businesses to serve notices of dismissal before the end of the 45 or 30 day consultation period provided the minimum periods have expired before the first dismissal takes effect. A dismissal takes effect when employment actually ends, ie; on the last date of employment, at the end of any notice period, and not when notice is given.

(Some) fixed term contracts are excluded from the calculation

The other major change relates to the rules around fixed term contracts which were included in the calculation. This was a particularly problematic for many educational providers who routinely recruit on this basis. The expiry of a fixed term contract is a dismissal in law and this had meant that many educational providers have to engage in rolling consultation processes in order to comply with consultation obligations.

Now, fixed-term contracts will be excluded from collective redundancy agreements when they expire at the end of the agreed term (but not otherwise). For example, if an employer proposes to dismiss as redundant 15 employees and not to renew the contracts of a further 15 employees whose contracts are about to end, there is no requirement to collectively consult.

This is to be welcomed as it provides certainty on this issue.

ACAS Code of practice

ACAS have also amended their guidance on how to manage collective redundancies to incorporate these changes. Our national head of employment, Tom Flanagan has worked with ACAS to re-write the guide. The Guide provides a ten point checklist for handling collective redundancies which addresses common concerns such as when consultation takes place, how to work out how many employees are involved, the information to be provided and when it ends etc. It also provides examples and makes suggestions about how to deal with the really difficult situations that can arise on a TUPE transfer.

The Guide also examines the complex issue to what constitutes an establishment – something that is of particular concern to many businesses.

This is because there is no statutory definition which has led to conflicting decisions and uncertainty. The somewhat arbitrary nature of determining this was highlighted when Woolworths went into liquidation in 2007. Unions acting on behalf of the staff took proceedings because the administrators had failed to consult with the workforce before the shops were closed down. The employment tribunal held that each store was an individual establishment, rather than Woolworths' nationwide retail operations as a whole. Consequently, the duty to consult was not engaged in respect of stores with less than 20 employees and so employees at those stores could not benefit from a protective award which affected a large number of employees. This decision is subject to an appeal which is due to be heard in May 2013.

The Guide addresses a list of questions which could be taken into account in identifying what may constitute an “establishment”. However, we recommend that where there is still doubt, it is better to consult, as decisions made by ET’s show that they are keen to discourage employers from avoiding consultation.

Fergal Dowling

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