This article was written by Nikki Duncan, partner at Michelmores LLP.
In a very important recent decision (Kelly v Hesley Group Limited) the Employment Appeal Tribunal has restated that the statutory collective redundancy consultation rules must be followed strictly. The rules cover more than just normal redundancy consultation, since "redundancy" is very widely defined. For example they apply equally to any reorganisation or proposed changes in terms and conditions of employment, affecting 20 plus staff. Also the same principles apply to TUPE consultation, so this case is of some significance.
In Kelly, the employer used an existing Joint Consultative Committee (JCC) to consult about planned changes to employees’ contracts to reduce working hours, freeze salaries and introduce lower overtime rates. Therefore this was an example of where the very wide definition of "redundancy" brought these rules into play. However, as is often the case, the JCC constitution did not give the JCC any negotiating function. It also allowed the employer to co-opt additional representatives to the JCC to ensure that "everyone has their voice heard". Therefore it was found not to be an appropriate body for collective statutory consultation.
In the light of this case it is clear that employers must ensure that employee reps have a specific mandate for the required consultation/negotiation. Also, that the burden of proving that authority is on the employer. Further, it is not enough to provide an "opportunity" for consultation. On the contrary the employer must proactively raise, and discuss, the specified statutory issues.
All non-unionised businesses should therefore review the constitution of whatever collective consultation forum (if any) that they have in place, to check that it meets these strict, requirements. Otherwise they risk a hefty financial penalty, in the form of a "protective award" (of up to 13 weeks’ pay per affected employee) for breach of the statutory requirements. There is a significant increase in the number of such claims (up to 8,000 during the last published claims period), with an increased risk where there are unions looking to build a case for statutory recognition bids.
In addition, there is the real risk of contractual changes, albeit agreed with a collective employee forum, being set aside because the forum did not have the required mandate or authority. This would, for example, give individual employees good potential claims for unauthorised wage deductions, if their hours of work and/or pay have been reduced, to which there may be no defence.
Many other employers simply do not recognise the need to have appropriate collective consultation mechanisms in place at all. Sometimes this is because the employers fear that a forum will invite unnecessary confrontation, or simply slow up the implementation of necessary business changes. In other cases, and particularly in smaller businesses, there is a positive cultural preference for direct staff communication, rather than through an intermediate consultation body. Whilst that is perfectly understandable, that approach is currently not permitted.
Although the Government are planning to give this right of direct communication to micro businesses (of probably up to 10 employees), any larger employers will continue to be exposed if they have not put in place a properly authorised consultation body, with a clear mandate to deal not only with collective redundancies, and wider restructuring, but also any statutory TUPE consultation (eg if contracting services, in or out) and/or any workforce agreements under, e.g. the Working Time Regulations.
Since such consultation bodies take time to "bed in", and to build trust and confidence between the management and employee reps, it is important to plan ahead, and not wait to introduce just before having to consult. Top level management interest, and buy-in, plus good joint rep training, and a clear constitution, are key elements of a successful, and helpful, forum. Anything half-hearted, and reactive, is unlikely to be effective and can even be counter-productive.
This has long been an important, and frequently overlooked, employment law requirement. In the light of the Kelly case it definitely needs to move up employers’ priority lists.