Employee Claims In Insolvency - Part 2

Following the recent case of Palmer v Northern Derbyshire Magistrates' Court where the Administrators were facing criminal prosecution through failure to file a HR1 form; now would be a good idea to produce a two part blog on Employee Claims. 

This is the second blog and it will look at the obligations of employers to consult with their staff when facing potential redundancies...

Employee Considerations

Consultation

If employees are being made redundant then they are entitled to a consultation with their employer. This involves speaking to them about:

• Why they are being made redundant, and
• any alternatives to redundancy.

If by liquidating your company you will be making up to 19 redundancies, there are no rules about how you should carry out the consultation. If you will be making 20 or more redundancies at the same time however, then the collective redundancy rules will apply. Your employees can make a claim to an employment tribunal if you do not properly consult, for example if the period of consultation starts late, or you do not consult at all.

Length of Consultation

There is no time limit for how long the period of consultation should be, but the minimum is:

• 20 to 99 redundancies - the consultation must start at least 30 days before any dismissals take effect.
• 100 or more redundancies - the consultation must start at least 45 days before any dismissals take effect.

Collective Redundancy Rules

If you are making 20 or more employees redundant at the same time, the consultation should take place between you and an employee representative ("rep").

This will either be:

• A trade union rep (if your employees are represented by a trade union), or
• An elected employee rep (if your employees are not represented by a trade union, or you do not recognise the trade union).

Electing Employee Reps

If you have employees that will be affected by the proposed redundancies they can:

• Stand for election as an employee rep.
• Vote for other reps.

Collective Consultations Must Cover:

• Ways to avoid redundancies.
• The reasons for redundancies.
• How to keep the number of dismissals to a minimum.
• How to limit the effects for employees involved, for example by offering retraining.

You must also meet certain legal requirements for collective consultations, as follows:

Redundancy Consultations

If you do not consult employees in a redundancy situation, any redundancies you make will almost certainly be unfair and you could be taken to an employment tribunal. You must follow ‘collective consultation’ rules if you are making 20 or more employees redundant within any 90-day period at a single establishment. There are no set rules to follow if there are fewer than 20 redundancies planned, but it is good practice to fully consult employees and their representatives. An employment tribunal could decide that you have dismissed your staff unfairly if you do not. Consultation does not have to end in agreement, but it must be carried out with a view to reaching it, including ways of avoiding or reducing the redundancies.

Collective Consultation Follow these steps:

1. You must notify the Redundancy Payments Service ("RPS") before a consultation starts. The deadline depends on the number of proposed redundancies.
2. Consult with trade union representatives or elected employee representatives - or with staff directly if there are none.
3. Provide information to representatives or staff about the planned redundancies, giving representatives or staff enough time to consider them.
4. Respond to any requests for further information.
5. Give any affected staff termination notices showing the agreed leaving date.
6. Issue redundancy notices once the consultation is complete.

Notification

Notify RPS by filling in form HR1. Instructions on where to send it are on the form. The deadline for notifying RPS depends on the number of proposed redundancies.

Number of proposed redundancies                               When notification to RPS must be given

20 to 99                                                                              30 days before the first redundancy

________________________________________________________________________________________

100 or more                                                                       45 days before the first redundancy

________________________________________________________________________________________

You can be fines an unlimited amount if you do not notify RPS.

Consultation

There is no time limit on how long consultations last, but there is a minimum period before you can dismiss any employees.

Number of proposed redundancies                               Minimum consultation period before dismissal

20 to 99                                                                              30 days

________________________________________________________________________________________

100 or more                                                                       45 days

________________________________________________________________________________________
 

Information you Must Provide to Representatives or Staff

You must provide written details of:

• The reasons for redundancies.
• The numbers and categories of employees involved.
• The numbers of employees in each category.
• How you plan to select employees for redundancy.
• How you will carry out redundancies.
• How you will work out redundancy payments.

Fixed-term Contract Employees

You do not have to include any persons employed under a fixed-term contract in collective consultation, except if you are ending their contract early because of redundancy.

If you are in any doubt as to whether the collective redundancy rules apply to you and your company or you have any queries or concerns as regards the consultation process, you should seek independent advice from a solicitor who specialises in insolvency and/or employment law.

If your company is potentially facing insolvency, and you have a large number of employees and would like some free and impartial advice, please do not hesitate to contact Chris Parkman on 01326 340579, or email him at chris@purnells.co.uk