When an employer is contemplating making collective redundancies (that is, dismissing 20 or more employees within a 90-day period), it is required to consult with unions or elected representatives of employees about a number of issues, including ways of avoiding the dismissals. Until recently case law has held that this duty extended only to consulting about the dismissals themselves and did not extend to the business reasons behind the decision that made the redundancies inevitable, for example, a site closure.
The EAT has now held in UK Coal Mining v NUM that a change to the legislation in 2004 meant that the earlier case law was no longer correct and, since the employer was now obliged to consult about ways of avoiding the dismissals, it could not comply with this duty unless it also consulted about the site closure prior to the decision being taken.
This case means that the employer will now need to share the sensitive financial information leading to the proposal with its employee representatives before reaching the decision to close the site. This will inevitably slow down the decision-making process. The penalty for failing to consult is three months' pay for each affected employee, and for a site employing hundreds of workers, could amount to millions of pounds.
Employers who are considering making more than 20 people redundant, especially where this arises by virtue of a site closure, should make sure they obtain legal advice at the very earliest stage in the process otherwise they will risk increasing the restructuring costs substantially (not to mention the legal costs and management time involved in defending a large claim). This case does not affect the law relating to individual consultation or where there are fewer than 20 redundancies.
In circumstances where an employer has multiple sites, they may wish to consider invoking mobility clauses, if these are contained within their employees' contracts, as an alternative to making redundancies. The recent Court of Appeal case of Home Office v Evans has made it clear that a mobility clause can still be invoked where a redundancy situation might arise, or has arisen, on closure of part of a business. However, to take advantage of this, the employer must be consistent from the start of the process as to which of the two routes it intends to pursue. An employer is not entitled to fluctuate between the two approaches of mobility or redundancy. Invoking mobility clauses will not be a viable or beneficial option for employers in all cases but should not be forgotten as a possible alternative to making redundancies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.