Collective Redundancy and the importance of consultation: Comparing the treatment of employees in Ireland and the UK

Since the downturn in the economy Cork has experienced a number of employees from high profile companies staging sit-ins where the employees were informed without prior consultations that operations were to cease.  In this article I propose to highlight the importance for employers to be aware of their legal obligations to consult their employees when carrying out collective redundancies and also for employees to be aware of their rights to compensation in a collective redundancy situation.

What is a collective redundancy?

This is the making redundant of a minimum number of employees within a period of 30 consecutive days – that minimum varying with the normal size of the company’s workforce ie 5 for company employing 21-49, 10 for 50-99, 10% for 100-299 and 30 employees over 300 employees.

Employer obligations under a collective redundancy

Under the Protection of Employment Acts 1977-2007 an employer is obliged to enter into consultations with a view to agreement with employee representatives. An EU case decided in 2005 (which is binding in Ireland Junk v Kuhnel) that worker consultations must now take place before any final decision on job losses is taken. These consultations must take place at the earliest opportunity and at least 30 days before the notice of redundancy is given. In the UK this figure is longer at 90 days. Further, some continental European governments subsidise their workers in their employment for several months whilst they look for new jobs.

What does consultation set out to achieve?

The aim of the redundancy consultation process is to consider whether there are any alternatives to the redundancies. An employer is obliged to provide the following information in writing to the employee representatives:

▪   The reasons for the redundancy;

▪   The number of employees affected;

▪   The number of employees normally employed;

▪   The period in which the redundancies will happen;

▪   The criteria for selection of employees for redundancy;

▪   The method of calculating any redundancy payment.

An employer is also obliged to inform the Minister for Jobs, Enterprise and Innovation in writing of the proposed redundancies at least 30 days before the occurrence of the first redundancy.

Further, the Employees (Provision of Information and Consultation) Act 2006 requires employers to consult with employees on substantial changes in the workplace, including proposals for collective redundancies. The Act applies to employers of 50 people or more.

If an employer chooses to announce the number of employees who are to be made redundant, and only then commences consultations with the Union/employee representatives, it may well be in breach of consultation obligations under the 1977 Act.

What if an employer fails to consult – Employee compensation?

A complaint may be made by an employee’s representative to a Rights Commissioner that an employer has not met the requirement to consult. The Rights Commissioner may make an award to each employee of up to four weeks pay.  However taking into consideration the delay normally experienced in having claims heard before a Rights Commissioner employees may seek redress from the High Court by means of injunctive relief. Failure to comply with the above obligations is a criminal offence for an employer punishable on conviction by a fine of, in most cases, a maximum of €5,000. Where the failure relates to the non-observance of the 30 day time period from the date of notification to the Minister, the fine is a maximum of €250,000. Although failure to comply is a serious matter prosecutions in Ireland have been rare.

The situation with employee compensation in the UK

Like in Ireland a complaint may be made to a Rights Commissioner that an employer has not met the requirement to consult. However, in the UK an Employment Tribunal can make an award to an employee of up to 90 days (effectively 12.86 weeks of wages), depending on the seriousness of the employer’s failure to consult. In the case of WW Realisations 1 Ltd (previously known as Woolworths plc), the Employment Tribunal made an award of 60 days to each employee (in this case over 24,000 employees to the value of £67 million in total) made redundant following the demise of Woolworths. Essentially, the Tribunal held that the administrators failed to adequately consult with employees’ representatives regarding collective redundancies. In another recent UK case, Bluesky Travel Systems Limited, 44 claimants were awarded the maximum award of 90 days gross pay in relation to the complete failure by their Employer to inform and consult with them about the effects of the transfer of activities to the Thomas Cook group.  The total value of the award to the claimants was in the region of £500,000.  There appears to be a trend in the UK where the Employment Tribunals there have been willing to award significant sums of money to claimants where there has been a failure, by an employer, to comply with its obligations to inform and consult with employees. While these decisions are not binding in this jurisdiction they are likely to be persuasive before the tribunals here.

The position in Europe?

The EU was given the opportunity in a recent case USA v NOLAN to provide some certainty over the trigger point for collective redundancy consultation where a strategic business decision leads to redundancies.  Unfortunately the European Court concluded that due to the facts of the case it had no jurisdiction to decide on the case.  The case will now go back to the UK Court of Appeal who must reluctantly rule on the issue.

Niall Colgan is a Solicitor based in Cork City, Ireland with 10 years experience

Mar 1, 13