05/01/2020 – Failure to consult award attracts maximum compensation.
The Southport Theatre and Convention Centre (STCC) in Merseyside employed 23 staff, and announced its decision to close its doors permanently in May 2020, a few months after the first phase lockdown.
Given that employers in some circumstances have been forgiven for their failure to consult in exceptional circumstances, why did an employment tribunal award the maximum compensation for a failure to consult against the STCC?
What is the duty to consult in redundancy situations?
Employers are legally obliged to consult with employees who are at risk of redundancy, and consultation must be genuine. A genuine consultation will allow sufficient time for consultation to take place, and will engage the employees in meaningful discussions to explore ways to avoid the redundancies taking place or, if they cannot be avoided, ways to mitigate their impact.
How much time is ‘sufficient time’ for a consultation to take place?
If there’s less than 20 employees involved there is no minimum time, but ‘sufficient time’ should allow for discussions, suggestions to be made (and answered) and, as a rule of thumb, at least 2 one to one meetings. When advising clients on non-collective redundancy exercises myHRdept normally recommends at least a couple of weeks.
When more than 20 staff are at risk though, the collective consultation regulations kick in, and the minimum period for consultation before termination notices can be issued is 30 days, increasing to 45 days if more than 100 staff are at risk. Collective consultation places additional duties on the employer, including the requirement for staff to elect representatives, and for the representatives to be trained to carry out consultation on their behalf.
In the case of the STCC, there were 23 staff at risk, and so the duty to collectively consult was triggered.
What is the ‘exceptional circumstances defence’ in this context?
Sometimes an employer may be able to show that it was not reasonably practicable to consult. Early in the pandemic some employers whose businesses were quickly destroyed may have been able to rely on this defence, but as the pandemic has gone on it is unlikely that employer’s will be able to convincingly claim that they couldn’t see possible redundancies coming.
Why couldn’t STCC rely on the exceptional circumstances defence?
The trade union representing the employees were able to show that the STCC were talking about closure with the local authority for a ‘couple of months’ prior to the announcement in May. The union convincingly argued that the STCC owners should have consulted with the employees during this time too. Instead the STCC failed to consult, and announced its closure and the loss of jobs on its social media feeds, an action that was unlikely to endear it to any future tribunal.
What was the award?
The maximum award for a failure to consult is 90 days pay per employee, and that was made in this case. This will be paid from any funds remaining from the winding up of the organisation, but in the event that funds are not available (entirely possible in a closure situation) the National Insurance fund will meet up to 8 weeks of any award made by a tribunal.
What should employers take from the STCC’s experience?
Ignoring collective redundancy rules is likely to lead to tribunal cases and fines. The extent of the fine will reflect the extent of the employer’s breach, with small technical consultation errors attracting lesser fines. Collective redundancy procedures are well understood and relatively simple to carry out – there are few excuses for not doing so. Generally speaking if you think you might need to make redundancies, you should start consulting as soon as possible and not wait until it is a foregone conclusion.
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