Collective Redundancy Consultation – Protective Awards

If an employer is proposing to make redundant 20 or more employees at one establishment within a period of 90 days, the collective consultation provisions of Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) come into play. Where the employer is proposing to dismiss 100 or more employees, the consultation period must be at least 90 days; otherwise it must be at least 30 days. Failure to consult with the appropriate representatives of affected employees can lead to a protective award requiring the employer to pay each affected employee 90 days’ pay.

In Evans, Motture and Hutchins v Permacell Finesse Ltd., the Employment Appeal Tribunal (EAT) considered the amount of the award payable when there has been a failure to follow the collective consultation provisions.

Mr Hutchins worked for Permacell Finesse Ltd. as a supervisor. He was one of approximately 77 employees that the company proposed to make redundant during a 90 day period, thus triggering an obligation to consult for a minimum of 30 days. However, Permacell made no provision for the election of employee representatives and was therefore unable to consult them. Several employees brought claims for a protective award on account of this failure.

The Employment Tribunal (ET) found that there had been a serious failure to comply with the consultation requirements, with no evidence of any mitigating factors. However, it considered that the breach did not have as great an adverse effect as would have been the case if 100 or more employees had been deprived of a minimum of 90 days consultation and so the sanction should be a 30 day protective award, which amounted to Mr Hutchinson being awarded £2,742.

The level of the award was the subject of an appeal to the EAT, which took as its starting point the judgment in the 2004 case of Susie Radin Ltd. v GMB and Others. This offered guidance on what matters the ET should take into account when determining the level of the protective award and made it clear that the purpose of the award is to punish the employer for breach of its obligations under Section 188 of TULRCA, rather than to compensate the employee for any loss, and that a proper approach where there has been no consultation is to start with the maximum period and to then reduce it only if there are mitigating circumstances. The EAT stated that there is now no specific link between the consultation period and the protected period.

The EAT also referred to the recent case of UK Coal Mining Ltd. v NUM in which the EAT held that protective awards of the maximum 90 days were correct for a serious breach of the statutory requirements on the part of the employer. The limited consultation that had taken place did not mitigate the seriousness of the conduct.

The EAT held that a serious breach of the collective consultation requirements must put the protective award near the maximum payable. The ET had made an error of law. It should have started at 90 days and worked downwards if there were mitigating factors. In this case, however, there was no evidence of mitigating or special circumstances so the EAT substituted a protective award of 90 days.

Says Yair Cohen, “This case serves as a further reminder to employers of the potentially serious financial consequences of failing to consult when making collective redundancies. Even if the obligation to consult is for a minimum 30 day period, a serious breach of the requirement can result in employees being granted a 90 day protective award.