Where an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, it must consult on the proposed redundancies for a minimum of 30 days. This increases to 45 days where the number of proposed redundancies exceeds 100. The employer is also required to inform the Secretary of State of the proposed dismissals at least 30 days before the first dismissal takes effect for between 20 and 99 potential redundancies and 45 days before the first dismissal where there are to be more than 100 redundancies at a single location. This notification is usually made by completing an HR1 form.

At the end of May 2016 the Employment Tribunal awarded full protective awards to City Link workers who were made redundant without the required statutory consultation period, marking the conclusion to the long running saga of the collapse of City Link. The award follows the earlier acquittal of three ex-directors of City Link in November 2015 for failing to inform the Secretary of State of the intention to make the redundancies. The three former directors became the first to be charged with the criminal offence since it came into effect under the Trade Union and Labour Relations (Consolidation) Act 1992 and marked a change in the government’s response to failures in relation to collective consultation obligations.

City Link had been in serious financial difficulty for some time. In the month preceding the redundancies it had a “turnaround plan” which would involve wide scale redundancies. City Link claimed that it was not practicable to consult with the employees within the statutory specified timescales because their final investment request was rejected on 22 December 2014. The appointment of an administrator was announced on Christmas Day and by New Year’s Eve 2014, 2,500 employees had been made redundant without consultation.

The three directors of City Link were acquitted in November 2015 after Judge Goodman, presiding over the hearing, found that the directors genuinely believed a sale in administration was not only possible but quite probable. He found that there were no plans to make redundancies on 22 December and that the directors hoped that by placing the business into administration the company could have been saved. However, while the directors may have escaped criminal liability, the Tribunal considering the claims for protective awards found that there had been a deliberate and calculated decision not to comply with legal obligations and ordered protective awards for the full 90 days.

The City Link case, and the more recent criminal charges which were brought against Dave Forsey, Sports Direct CEO, for failing to notify the Secretary of State of the redundancy dismissals at USC in January 2015, demonstrate that, while previously a relaxed approach has been taken to filing the HR1 Form, the Government appears to have a newfound appetite to use criminal sanctions and its powers to hold officers to account. Employers who fail to consult may find themselves facing large sums of protective awards. The award is up to a maximum of 90 days gross pay for each dismissed employee and is designed to be punitive rather than compensate the employee for any loss suffered. In contrast, the penalty for a failure to make a timely notification to the Secretary of State is a criminal offence committed by both the company and any director found to have consented or connived to the offence or to whom the neglect can be attributed. Since March 2015, the fines on a conviction have been unlimited.

This serves as a reminder that is essential for employers facing larger redundancies to plan carefully and understand their legal obligations fully. The possibility of a criminal liability is more than theoretical and breaches of the redundancy consultation requirements can have significant personal and reputational repercussions.

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Victoria Cook

Senior Associate

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Posted on 17/06/2016 in Legal Updates

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