Collective redundancy consultation rules

Transcription

1 Collective redundancy consultation rules Submission to the Department for Business, Innovation and Skills Chartered Institute of Personnel and Development (CIPD) January 2012

2 Background 1. The CIPD is the leading independent voice on workplace performance and skills. Our primary purpose is to improve the standard of people management and development across the economy and help our individual members do a better job for themselves and their organisations. 2. Public policy at the CIPD exists to inform and shape debate, government policy and legislation in order to enable higher performance at work and better pathways into work for those seeking employment. Our views are informed by evidence from 135,000 members responsible for the recruitment, management and development of a large proportion of the UK workforce. 3. Our membership base is wide, with 60% of our members working in private sector services and manufacturing, 33% working in the public sector and 7% in the not-for-profit sector. In addition, 76% of the FTSE 100 companies have CIPD members at director level. We draw on our extensive research and the expertise and experience of our members on the front-line to highlight and promote new and best practice and produce practical guidance for the benefit of employers, employees and policy makers. General comments 4. EU Council Directive 98/59/EC of 20 July 1998 lays down the procedure to be followed in respect of collective redundancies (defined as such where the employer is planning to dismiss as redundant at least 20 employees in a 90-day period): the employer must notify the competent public authority in writing of any projected collective redundancies at least 30 days in advance of the redundancies taking place; the employer must forward a copy of the notification to the workers' representatives; the employer must consult employee representatives with a view to reaching an agreement; such consultation must begin in good time ;

3 redundancies can take effect, at the earliest, 30 days after the notification. The directive does not set a minimum period for consultation: this is the result of UK regulation. 5. The CIPD would support a minimum time period of 30 days in relation to all redundancies affecting 20 or more employees, in the interests of securing greater flexibility in managing redundancies. Employers ability to respond to changing market requirements is a key element in maintaining the UK s flexible labour market. The UK already has the third least regulated labour market in the OECD, and it is important to maintain this flexibility to allow employers to manage their workforces in the way that works best for them. 6. We do not believe that a 30-day minimum time period will necessarily have a detrimental effect on either the quality of consultation or the impact on employees. Indeed, employees may sometimes prefer a shorter period of consultation when it is clear that redundancies cannot be avoided, as this may help to minimise periods of uncertainty surrounding their future, whether within or outside the organisation. 7. However, we would welcome greater clarity in certain areas, as some of the terminology currently used has proved confusing for employers. We urge that any regulations or guidance should support the aims of ensuring effective communication and employee consultation take place. Greater clarity would enable employers to deal more confidently with collective redundancies, knowing what is required of them and allowing them to be reassured that they are on the right side of the law. We will now turn to address specific questions within the consultation. Question 7: With whom do you consult about collective redundancies? What are the advantages and disadvantages of engaging with different types of representative? 8. Members suggest that the formal notification process for the sending of consultation documents should be changed. Firstly, we believe that it should no longer be necessary to send documents to the national headquarters of trade unions: instead, local branch secretaries should serve as the notification point. In

4 members experience the union head office seldom responds, and even when it does, it tends to be on a generic issue rather than the particular proposed issues and changes. 9. Members have also reported problems in managing the election of representatives. Some have played safe by involving the whole workforce, including union representatives. Little detailed guidance is available on how to conduct elections and employees may be reluctant to become involved in discussions about impending redundancies. There is a sense that existing regulations do not reflect the realities of today s workplaces: it might be helpful to make clear that the objective is for employers to ensure that all employees are consulted and that information is effectively communicated up and down the line. Question 15: What are the advantages or disadvantages of the current 90-day minimum time period before redundancies can take effect, in your experience (a) for employers (b) for employees? In particular, what is the relevance of employees statutory or contractual notice periods? 10. The existence of a statutory consultation period for implementing redundancies appears to have had a broadly positive impact on employer practices. Research by Warwick University for DTI in 1999 concluded that, although collective consultation processes did not necessarily have a big impact in modifying employers decisions to make redundancies, most employers accepted that the consultation period was built into their planned timetable and the processes were not handicapped by this. CIPD believes that the legislation on collective redundancies has been influential in helping to promote good practice in relation to the handling of major redundancies by medium and large firms. 11. This belief is supported by the fact that Employment Tribunal claims relating to a failure to consult in accordance with the collective redundancy obligations have continued to decrease in It seems likely that this reflects increased awareness and understanding by employers of their legal obligations. Employers are also aware of the risk of protective awards of up to 90 days' uncapped pay per affected employee, coupled with the possibility of unfair dismissal compensation if due process is not followed.

5 12. BIS advice is that redundancy notices can only be issued when consultation has been completed. This was confirmed by the European Court of Justice in the case of Junk v Wolfgang Kuhnel [2005] IRLR 310, ECJ, in which it was decided that when collective consultation is required, it must be completed before notice of dismissal is given to any of the employees concerned. A notice of dismissal issued by an employer during the consultation period will be invalidated and will still be invalid even if it does not expire until after the end of the consultation period. 13. However, some lawyers advise that notice may be served in the consultation period but actual termination must not occur until after the consultation period. The scenario outlined in the call for evidence (page 16) where there can be no dismissal before day 31 of notification although redundancy notices can be issued (though not come into effect) earlier if agreement is reached sooner is confusing and hard to justify or explain. Some clarification of the law in this area is badly needed. 14. There may be some ambiguity about when consultations have been completed employer and employee representatives may disagree about whether outstanding issues have been disposed of. In such cases there may be a temptation for trade unions to seek to prolong the consultation process in order to delay the issuing of termination notices to employees and postpone the effective date of redundancies. Some recognition that redundancy consultation may be completed before the end of the 30 day statutory period, and clarification of what is meant by completion, would be helpful. 15. The 30-day consultation period has a significant impact on expectations and will often be needed in full in order for the planning and implementation processes involved (see answer to question 19 below) to be carried through. Nevertheless, there will be cases where consultation is completed sooner and there is nothing left to talk about. The timing will depend on the environment: the relationship between employer and trade unions may be critical to the ability to complete consultation in a shorter time. 16. In any case, notices cannot expire before the end of the 30/90 day consultation period. This means that lengthy statutory notification periods may delay the issuing of notices and so add to the costs of the redundancy exercise. By

6 postponing the effective date of redundancy, they may also discourage some employees from looking for new jobs. 17. Many employers are comfortable with the idea that the length of the consultation period is specified and fixed by legislation. There is also anecdotal evidence that some employers apply the 30/90 day timescales to consultations in order to demonstrate that adequate time has been allowed, rather than in the belief that this length of time is necessary to allow for active discussions with staff. There could, however, be value in underlining that consultation may legitimately be completed within a shorter timescale. 18. In many cases, employees may actually prefer employers to get on with it, as lengthy consultation often means an extended period of uncertainty in terms of career and personal development, employment security and finance. This may also result in greater periods of anxiety and the productivity and stress-related issues associated with period of instability (see answer to Q 16 below). Employees who choose to leave voluntarily before consultations have been completed, to take up another job for example, may lose their right to redundancy pay. 19. Employer practice in relation to notice periods on redundancy under individual employment contracts depends heavily on the particular circumstances. Pay in lieu of notice can be used to shorten the period before an employee is able to take up another job. Where an employee leaves voluntarily, he or she may be given pay in lieu of notice. However, there can be no automatic assumption that this will be the case: where work continues to be available for employees who are to be made redundant, they may be required to work their full notice period and this is probably the default case. Question 16: What are the costs to business of the 90-day minimum time period over and above a 30-day period? What generates these costs? 20. There may be costs if the effective consultation process is extended, but the major costs to business are related to employers inability to respond in a timely way to commercial pressures requiring restructuring of their business. These costs arise from the impact of a long statutory notification period on the timing of implementing business decisions. Where employers are able to anticipate the

7 possible need for redundancies, they can begin the process in good time but where circumstances are changing rapidly this may not be possible. Significant costs may also arise where workforce plans are not thought through and organisations have to recruit/rehire as a consequence. 21. Where there is an increase in absence and stress due to a prolonged period of uncertainty, there might also be costs associated with direct absence, healthcare /employee support, stress claims, plus NHS (government-funded) support and medical costs. These additional employee costs can be potentially quite significant for employers, for whom a healthy and engaged workforce is vital to the successful operation of their businesses. Question 17: If there were a statutory provision for employers and employee representatives to shorten the 90 day minimum time period by voluntary agreement, would this be used? 22. Employers would generally wish to see a shorter statutory minimum period, since this would give them more flexibility to plan and implement redundancies. Where employers are consulting non-union representatives, there may be relatively little difficulty securing their agreement to a shorter period. But trade unions might often be reluctant to agree, for the reasons outlined in answer to question 15. So there are questions how widely such a provision would be used, or in practical terms could be used especially within heavily unionised (including public sector) environments. 23. Some employers might also be reluctant to consider using such a provision unless protection from being found to have failed to adequately consult was written into the statutory provisions. This is due to the associated legal risk and cost of not being able to prove you have engaged in appropriate consultation periods. Question 19: What would be the advantages or disadvantages (a) for the employer and (b) for the employee of reducing the minimum time periods when 100 or more redundancies are proposed to 60, 45 or 30 days? 24. The CIPD would support a reduction of the minimum time period to the 30 days required by the European directive, in the interest of greater flexibility

8 in managing redundancies. Employers ability to respond to changing market requirements is a key element in maintaining the UK s flexible labour market. 25. Furthermore, as discussed in our response to Question 16, reducing the minimum time periods may have a positive effect (or at the very least, may mitigate some of the potential negative effects) of prolonged consultation periods on employees. Where the uncertainty involved in longer consultation periods contributes to increased stress levels in employees, employers face the prospect of the additional costs associated with direct absence, healthcare support, and medical costs. 26. The amount of management time and effort required to manage a major redundancy can be very significant. At the very least, in order to plan and implement a redundancy situation properly, the following stages need to be followed in most redundancies: planning identifying the pool for selection seeking volunteers consulting employees selection appeals and dismissals suitable alternative employment redundancy payment counselling and support. 27. The above does not necessarily mean that a lengthy period of consultation is required. In any case, legislation only specifies minimum periods for consultation and applying a 30-day consultation period for all collective redundancies would not rule out the parties adopting a lengthier consultation period if this was needed. Shortening the statutory period will have no necessary impact on the length or effectiveness of the consultation process in practice. 28. Redundancy consultation must begin in good time, while the proposals are still at a formative stage, to ensure there is reasonable time for meaningful consultation (Trade Union and Labour Relations Act (TULRCA )1992 s.188(1a) as amended). For example, in the case of MSF Union v Refuge Assurance Plc

9 2002 ICR 1365, EAT the employees took their employer to an Employment Tribunal, complaining that it had failed to begin consultation with the representatives 'in good time' in connection with a proposed merger with United Assurance. The Employment Appeal Tribunal said that an employer must consider the probable date of any redundancies and how long will be required for effective, good-faith consultation. 29. In deciding when to begin consultation on redundancies, employers need to balance the desirability of engaging in early consultation with the need to present a credible plan that will not be subject to violent shifts of direction as commercial or other circumstances shift. This may require lengthy internal discussion within the management team before intentions are made open to scrutiny by and discussion with employees. 30. Current legislation states that consultation must begin in good time and when the employer is proposing the redundancies. While recognising the difficulties of catering for a wide range of different circumstances, members would welcome clarification of these terms. Case-law suggests that employers should begin consultation before the decision to make redundancies is taken. The consultation process can usefully influence the handling of redundancies, as for example where employees agree to take a pay cut in order to reduce the number of redundancies. However, in practice, consultation is almost never able to influence the employer s fundamental decision, which is driven by commercial realities. In order to comply with caselaw, employers may be driven to pretend that no final decision has been taken and, given the need to maintain trust in the communication process, this can be damaging to the outcome of consultation. A more realistic and less onerous requirement on timing would be helpful. 31. The directive makes clear that the statutory requirement for the employer to give a minimum period of notice of redundancies is intended to be used by the competent public authority to seek solutions to the problems raised by the projected collective redundancies. There is no suggestion in the directive itself that the length of the notification period is designed to allow for effective consultation or should be coterminous with it. There would therefore appear to be no obstacle in EU law to the UK adopting a 30-day consultation period.

10 32. It might be argued that reducing the statutory period could create an impression that the Government is downgrading the consultation requirement and expecting employers to pay less attention to managing the impact of redundancies on the affected employees. This argument could be countered by making clear that the employer is required under the existing regulations to consult with employee representatives on ways of mitigating the effects of redundancies. Many employers currently offer outplacement support to employees affected by redundancies and this could be included in good practice guidance for employers. There are different opinions among CIPD members as to the best way of spending limited resources in redundancy cases, including the balance between topping up statutory redundancy payments and offering outplacement support. 33. Many employees would benefit from a shorter consultation period as it would reduce the period of time in which they face uncertainty about their career and personal development prospects, job security and financial security. CIPD members have commented that in many instances employees don t want to be left in limbo and are keen for final decisions to be made about the nature and timing of redundancies. Question 21: What would be the advantages or disadvantages of increasing the threshold for the number of redundancies proposed for the 90-day notification period (i.e. increasing it to a number above 100 redundancies)? What should the threshold be? 34. The CIPD would not support this, believing that it is preferable in the interests of simplicity to adopt a single minimum period. The only advantage would be in reducing the number of instances in which the legislation would require a 90-day notification period. Question 22: What would be the advantages or disadvantages of a graduated threshold with different time periods applying for different numbers of redundancies? 35. The CIPD would not support the idea of a graduated threshold. This would simply add to the complexity of the existing legislation. There is no arithmetical

11 relationship between the numbers of employees affected by redundancies and the length of time required for consultation. Question 23: The Government is also calling for evidence on the Transfer of Undertakings (Protection of Employment) Regulations. Please identify any issues that you have in terms of how the TUPE Regulations and the rules on collective redundancy consultation fit together. 36. The BIS background statement on the TUPE consultation notes (page 12) that, although both TUPE and collective redundancy rules require employee consultations, these cannot currently take place at the same time, despite there being a degree of connection between the decisions to be taken. This can inhibit communication between the acquirer and the workforce to be acquired, and can be unhelpful to both. In particular, the workforce may be uncertain about the scale of possible redundancies and may assume the worst, so that the acquirer is talking to an anxious and probably de-motivated workforce. 37. The Business Link website says: If you [i.e. someone buying a business] do want to discuss reducing employee numbers or reorganising staff, it's a good idea to do this once you have completed the due diligence period, but before you take over the business. As the new employer you should inform and consult all employees - including employee representatives - who may be affected [emphasis added]. So existing guidance usefully qualifies the statement in paragraph 6 of the call for evidence that these consultations [under TUPE and collective redundancies rules] cannot be undertaken at the same time. 38. The attached case study of employee consultation at Charter International shows the value of consultation by the employer being taken over when a business transfer takes place. Although the takeover was effected by share acquisition so TUPE rules did not apply, recently revised rules by the Takeover Panel required the company to obtain the opinion of its employee representatives on the effects of the offer on employment, and append the opinion to a circular to its shareholders. Further specific consultation with employee representatives will be needed over any ensuing redundancies. Nevertheless, Charter was able to achieve an interface between employees and acquirer that would not have occurred in a typical TUPE situation.

12 39. CIPD would not support legislation to require employers to undertake additional consultations about possible redundancies in the context of business transfers. We do believe, however, that there is a role for government in encouraging and promoting good practice, particularly in the case of high-profile business transfers where there is a risk of damage to companies reputation. Companies whose assets and workforce are being transferred should be encouraged to talk to the acquiring business, and if possible involve them in consulting the workforce about the proposed takeover. This effective 3-way dialogue is possible within existing legislation and would give the acquiring company information about attitudes within the business being acquired and the opportunity to take those views into account. 40. In the Charter case, such a consultation process was valuable in maintaining employee morale and reducing the likelihood that good people would jump ship. It also reduced the risk of the kind of public criticism that followed the Kraft takeover of Cadbury.