In light of British Airways’ announcement that they may make 12,000 employees redundant despite almost 23,000 staff having been placed on furlough, we have reached the point that we probably all expected.  Whilst the Government’s Coronavirus Job Retention Scheme (CJRS) has helped to take the pressure off businesses somewhat, unfortunately, it has not been able to resolve the wider commercial impact of the Covid-19 pandemic on consumer demand.

There continues to be much debate around whether the Government will extend the CJRS, or taper it out in some way, potentially by sector.  Notwithstanding this, our experience is that businesses are now looking to take difficult decisions in respect of large scale redundancies sooner rather than later, in order to safeguard the long term viability of their businesses.

In this blog, and particularly in the context of the ongoing CJRS, we set out our top ten FAQs when it comes to carrying out large scale redundancies which trigger the statutory collective consultation obligations.

1. Should you even consider making redundancies whilst the CJRS remains in place?

Whilst some EU countries have banned businesses from making redundancies during the Covid-19 pandemic, the UK isn’t one of them.  Further, the Government’s CJRS employee guidance confirms that you can still be made redundant during furlough.  Clearly, the spirit of the CJRS is to avoid redundancies, however, if it is clear, as in the case of British Airways, that changes need to be made to the structure of your business in light of the pandemic, then there is no reason to put off the inevitable.

2. How long do you need to consult for, and what are the consequences of failing to do so?

Where you are proposing to dismiss 20 or more employees as redundant at one establishment in any 90 day period, you have a legal obligation to inform and consult with appropriate representatives of the affected employees for a 30 day period (for 20-99 proposed redundancies) or 45 day period (for 100 or more proposed redundancies).  Failure to collectively consult (which includes a failure to elect employee representatives in the absence of any other elected body to consult with such as a recognised trade union) could lead to a protective award claim being issued in the Employment Tribunal, which if successful, could lead to compensation up to a maximum of 90 days’ gross pay per affected employee.

3. How do you notify BEIS, and what are the consequences of failing to do so?

It is crucial that you notify BEIS by virtue of the HR1 form either 30 or 45 days’ prior to the first dismissal taking effect, and also provide a copy to the appropriate representatives.  Failure to notify BEIS is a criminal offence, which can lead to both an unlimited fine and potential prosecution for any director.  This is a strict liability offence and therefore ignorance of the law is no defence.

4. What constitutes an establishment?

This will always depend on the facts of the case, but generally this means the unit or legal entity to which the employees made redundant are assigned to carry out their duties.

5. When do you need to commence collective consultation?

The obligation to collectively consult is triggered once redundancies are ‘proposed’, which may arguably be prior to the end of the CJRS.  However, the precise point in time will depend on the facts of the case.  Proposed means less than a decision because, for example, if the decision has been made to close a site, the decision has already been made and there is nothing to consult about, but it has to be more than mere contemplation about the future possibility of redundancies.  It is crucial that you are clear when consultation should be commenced rather than simply counting back, in the case of the CJRS, 30 or 45 days from the proposed end of the scheme.

However, don’t forget that you can only commence collective consultation once the appropriate representatives are in place, and the requisite information required under s.188 Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) 1992 has been provided.  If you need to elect employee representatives, you should allow a minimum of one week to do so.  You will also need to ensure that employees nominate colleagues to become employee representatives, and it is only if they fail to do so within a reasonable period of time that you would be able to consult with employees directly.

6. Can you collectively consult during a period of furlough?

Yes.  Whilst the guidance makes it clear that employees are unable to perform any work for the employer during a period of furlough, appropriate representatives (employee or trade union) are arguably performing a service for the employee rather than the employer.  Further, it is clear that as part of their role as employee representative, they would not be generating revenue for the business.

Once employee representatives are in place, communication and consultation can be carried out via electronic means such as Zoom, WhatsApp or similar.

7. Can you simply select those on furlough for redundancy?

The Government guidance was clear that the CJRS should be operated in line with employment and equality laws.  Therefore, in practice it is highly likely that those who were selected for furlough were chosen for particular reasons, which will be similar reasons to their selection for redundancy.  If you have failed to document their process for selection for furlough, you will need to ensure you have a robust selection method in place for the purposes of redundancy.  Whilst being selected for redundancy as a result of being placed on furlough is not in itself a protected characteristic, you should be mindful that some employees on furlough may have protected characteristics that could give rise to discrimination claims if they are found to have been unfairly selected for redundancy.

8. Can you give notice during a period of furlough, and if so, would that notice pay be at the reduced furlough rate?

As you can make redundancies during any period of furlough, you are therefore able to give notice during furlough, although any dismissals should not take effect until after either the 30 or 45 day collective consultation period.  That said, you may wish to defer notice until the end of the CJRS or give notice and obtain consent to extend it until the end of the CJRS for employee relations reasons if the CJRS remains live.

In terms of notice pay, there is considerable debate in this area as to whether employees who have agreed to be furloughed should then only receive 80% of their pay during their notice period.  Our view is to err on the side of caution, whereby employees who are only entitled to statutory notice from their employer (or less than one week more than statutory notice) will be entitled to receive full pay during their notice period.  If, however, employees are entitled to one week more than statutory notice from their employer they would only be entitled to receive 80% of their pay during their notice period.

9. Would the ‘special circumstances’ defence apply here regarding a failure to collectively consult?

Potentially yes.  The two key elements of a successful ‘special circumstances’ defence is that (i) it is not reasonably practicable to consult and (ii) that the business takes such steps that are reasonable in the circumstances.  The special circumstances defence is rarely successful but it is difficult to see how it would not apply in light of the Covid-19 pandemic although there is an argument as to whether it was not reasonably practicable to consult with those furloughed employees sat at home during lockdown with little else to do.  Further, be mindful that the special circumstances defence does not absolve a business from electing representatives where it does not recognise a trade union or for failing to carry out any consultation; it merely means a potential defence to having to carry out the full 30 or 45 day consultation.

10. How do you deal with rolling redundancies?

This is likely to be a real issue for businesses who may initially be reluctant to make high numbers of redundancies, but as time goes on, realise they may have been too conservative in their estimations.

If your initial round of redundancies triggers the collective consultation obligations (so 20 or more), as long as you collectively consult in relation to those redundancies, any further redundancies in the same 90 day period would not trigger further collective consultation.  However, if you initially make 19 or less redundancies, and then make say, a further 10 redundancies a few weeks later, which takes numbers over 20, the position is less clear.  The only reported case on this point dates back to 1978, which decided that the law does not "retrospectively" impose the obligation to collectively consult in respect of dismissals that have already happened, merely because further redundancy proposals emerge.  However, whether an Employment Tribunal would take the same view where it was clear that the second round of redundancies were already in mind at the time of the first round is unclear.  If not, this potentially exposes you to claims for a protective award for a failure to collectively consult in relation to the first round of redundancies.  Therefore, think very carefully about the needs of the business before you take any decisions in relation to the number of redundancies.

Beverley Smith
Partner