News & Events

Collective consultation period to be reduced from 90 to 45 days in large scale redundancies

By: Amanda Steadman

Submitted by Firm:
Addleshaw Goddard
Firm Contacts:
Michael Leftley, Sarah Harrop
Article Type:
Legal Update
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 The Government has published its response to the consultation on changes to the collective redundancy legislation.  The response confirms that the consultation period for redundancy exercises involving 100+ employees will be reduced from 90 to 45 days.  Fixed-term contracts which expire naturally will also be excluded from the scope of the collective redundancy rules. The changes are due to come into force on 6 April 2013.

Background

Where an employer wishes to make in excess of 20 redundancies from the same establishment within a 90-day period, it must consult with representatives of the affected employees (including trade unions where present) about the proposals.  Sections 188 – 198 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), provide that no redundancy can take effect until at least:

·          30 days after the start of consultation where 20 – 99 redundancies are proposed; or

·          90 days after the start of consultation where 100+ redundancies are proposed.

On 21 June 2012 the Government launched a 12-week consultation on a package of reforms to the existing collective redundancy regime.  You can read our detailed report on the consultation here.

The Response

The response document summarises the responses received from the 160 respondents to the consultation and sets out the Government's strategy for change.  The majority of respondents to the consultation agreed that there was a need to reform the existing rules, although there were differing perspectives on this: employers considered the regime too rigid and opaque, whilst unions believed that the rules were too vague and did not afford sufficient protection to employees.

(a)        Reducing the 90-day minimum consultation for large-scale (100+) redundancies to 45 days:

The majority of respondents to the consultation (52%) favoured a reduction of the consultation period to a minimum of 30 days.  Unsurprisingly, it was mainly employers who favoured a 30-day period, citing flexibility and legal simplicity as the main benefits of this option.  The majority of trade union respondents, however, favoured no change to the current 90-day period, with a small number arguing that this should be increased rather than reduced.

Only 19% of respondents supported a reduction to a 45-day consultation period.  These respondents felt that this would still allow flexibility for businesses but would provide greater protection for employees.  It was also felt that this would help prevent rushed consultations.

Despite the clear support from employers for a 30-day consultation period, the Government has decided to retain a two-tier structure and reduce the consultation period to 45 days.   In the response, the Government acknowledged the unions' stance that employees benefit from more pay and a longer time to find alternative employment in a 90-day period.  However, they highlight that this is not the primary purpose of the collective redundancy legislation.  As a compromise, a 45-day period was chosen in recognition of: "…the level of concern that less responsible employers will treat the time period as a maximum instead of a minimum, as well as the risk that this could be seen as a signal that the Government is placing less weight on the importance of consultation". 

 (b)       New ACAS guidance:

There was some appetite amongst respondents for the introduction of a statutory Code of Practice but the Government has rejected this idea on the basis that it would limit flexibility to deal effectively with the diverse range of collective redundancy scenarios that arise.

Instead, ACAS are to be tasked with preparing new non-statutory guidance on the collective consultation process which will address the principles and behaviours behind a good quality consultation, with a particular focus on dealing effectively with the most contentious issues.  In particular, guidance will be given on the meaning of "establishment".  The guidance will set out the various factors to be considered and explain how they might impact upon the meaning of establishment.

(c)        Exclusion of fixed-term contracts:

In the consultation, the Government proposed to issue guidance on how fixed-term contracts were to be handled in the context of a collective redundancy exercise.  However, 58% of respondents thought that this approach was not correct and favoured a legislative solution. Some employers felt that the requirement to include fixed-term workers in such exercises distracted focus from the important issues affecting permanent staff who may be facing redundancy at the same time.   

As a result, the Government has decided to take advantage of the exemption permitted by the EU Fixed Term Workers Directive and legislate to exclude fixed-term contracts from the collective redundancy regime.  However, the exemption will only apply where the fixed-term contract has a clear end point – either through the completion of a particular task or through reaching a specified time.  In addition, the exemption will not apply where the fixed-term contract is terminated early.

The Government does not believe that the introduction of this exemption will drive an increase in the use of fixed-term contracts or lead to the widespread abuse of successive fixed-term contracts.

Next Steps

The Government intends that the amended legislation and accompanying ACAS guidance will be in place by 6 April 2013.  The Government has also committed to review the operation and impact of the shorter period on the labour market after it has had time to see its full effect.

Comment

Whilst any reduction in the minimum consultation period will be welcomed by employers, the compromise solution of 45 days does not offer the simplicity and flexibility that a uniform 30-day period would have permitted.  Employers will still have to grapple with the issue of determining what an "establishment" is in order to identify which consultation period applies.  

At the same time, it's unlikely that a 45-day period will be welcomed by the unions, who were firmly opposed to a reduction of the consultation period.  The union respondents highlighted their view that there would be an increase in tribunal claims if the period were to be reduced.  It remains to be seen whether unions involved in collective consultation exercises will now seek to argue, as a matter of course, that consultation has not been meaningful and/or has not been exhausted within the 45-day period.

Collective Redundancies: Government Response to consultation to changes to the rules