The Government has brought Christmas cheer to employers this week by announcing the halving of the collective redundancy consultation period for large scale redundancies, from 90 to 45 days. Employers embarking upon any major restructuring exercise will be heartened by the prospect of being able to restructure more quickly, so saving on administration and wage costs. In many ways, staff will also benefit from a shorter consultation period as this will mean they will know where they stand in a shorter timescale – this in turn will be less detrimental to the remaining staff in terms of morale and productivity. The reforms are due to come into force on 6 April 2013.

Currently an employer is required to consult employee representatives where it is proposed to dismiss 20 or more employees at one establishment within 90 days or less. The consultation period depends on the number of employees to be dismissed – 30 days for 20 to 99 employees and 90 days for 100+ employees. In June 2012, the Government launched a consultation on proposals to change the rules on collective redundancies, including reducing the consultation period where an employer is proposing to make 100 or more redundancies at one establishment. Yesterday, the Government announced its collective redundancy reforms in the response.

New non-statutory Guidance

Meaning of "establishment" As part of the reforms, there will be new ACAS guidance on the meaning of "establishment" but we do not think this will solve the current uncertainty over the meaning of the term "establishment" – an issue highlighted recently in the Woolworths case where employees in smaller stores were denied a protective award for failure to consult them about their redundancies.

Current UK case law enables employers to take a "geographical" approach so that where there are proposed redundancies over a number of the employer's sites, each site is regarded as a separate "establishment" – therefore making it less likely that the proposed redundancies will be caught by the collective consultation rules.

The proposed ACAS guidance attempts to extend the current case law by taking into account certain factors which have arguably been rejected by the Courts. The new guidance will cover geographical location, management structure, management or financial autonomy, cohesion of the workforce, nature of the work undertaken or type of service provided, contractual relationship between employer and employee, and the level at which the decision to dismiss employees is taken.

Good quality consultation:

The ACAS guidance will also cover the principles and behaviours behind good consultation, to help employers deal effectively with the consultation process – and will include:

  • when consultation should start
  • who should be consulted
  • what should be discussed
  • how the consultation process should be conducted, and
  • when consultation is considered to be complete

Fixed-term contracts

A recent UK judgment which considered whether the expiry of fixed term contracts should be counted as a "dismissal" for the purposes of the collective consultation requirements has created some confusion and concern, particularly for larger employers who regularly employ large numbers of staff on a fixed term basis. The Government believes that consultation about redundancy is not necessary where the contract is clear about the point at which employment ends – either through the completion of a particular task, or though reaching a specified time. There will therefore be new legislation to make this clear.

The impact of the changes

Employers will welcome the Government's decision to halve the minimum consultation period. Not only will this reduce the costs and management time involved in large-scale redundancies, but it should also help to alleviate some of the uncertainty for staff involved in a consultation process, and enable businesses to focus on the future more quickly.

As for the new guidance, it appears that this will assist employers with the planning and management of the consultation process. However, it seems that introducing this guidance is more likely to add to the uncertainty about the meaning of "establishment" and, if followed, lead to more restructuring and redundancies being caught by the collective consultation rules. Nevertheless, since the consultation period for large scale redundancies is now only 15 days longer than redundancies of 20-99 employees, the impact of the decision regarding an establishment for large scale redundancies will be less significant.

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