Collective Redundancy – Careful Consultation Vital

In a recent dispute, the Employment Appeal Tribunal (EAT) stressed how important it is for employers to follow the correct procedure for consulting staff when they are proposing to dismiss as redundant 20 or more employees (Kelly and Another v The Hesley Group Limited).



In directing a rehearing of the case, the EAT gave guidance on the steps employers must take to ensure compliance with the duty to consult, which is set out in Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).



The Hesley Group Limited provides residential care and education to disabled people. The company was experiencing severe financial pressures and had proposed changing the contracts of 300 staff members at a school in South Yorkshire to save money by reducing their hours, freezing their pay and cutting overtime rates. Following negotiations, a majority of the affected employees had agreed to the proposed variation of their contracts. Collective consultation was entered into with the remaining 32 staff members in respect of proposals to terminate their contracts and offer re-engagement on new terms and conditions. No trade union had been recognised for the purpose of consultation in respect of collective redundancy so the consultation was carried out with employee members of a joint consultative committee (JCC).



The employees sought protective awards because of their employer’s failure to carry out the correct consultation procedure under Section 198 of TULRCA, but their claims were rejected by the Employment Tribunal (ET). The employees’ challenge to that decision was upheld by the EAT, which remitted the matter to the same ET with a direction to redetermine the issues after making further findings of fact.



The EAT found that the ET had failed to make any findings on whether the JCC had authority to act on behalf of the affected employees and had failed to place the burden of proof upon the employer to show that it was the appropriate body with which to consult. The ET had also failed to consider the significance of the fact that the JCC’s role was purely consultative and it had no power to negotiate on behalf of the employees.



Emphasising the employer’s obligation to suggest alternatives to redundancies and to initiate discussion of means of avoiding dismissals, reducing the numbers to be dismissed and mitigating the consequences of dismissals, the EAT ruled that it was not enough for the employer to provide an opportunity for such discussion. A letter written directly to employees had also failed to provide all the necessary information in respect of the proposals, as required by Section 188(4) of TULRCA.



The EAT noted that the employer may not have appreciated until late in the process that it was bound by the consultation requirements of TULRCA and that its fault may have been accidental. It might be said that the employer had sought to involve as many employees as possible in discussions relating to the new contracts. In those circumstances, and given the relatively low value of the claims, the EAT urged a negotiated or mediated settlement to the dispute.