The company Phones 4U went into administration in September 2014. After two years of the company going into administration, an employment tribunal found that the company failed to comply with their duty to collectively inform and consult with employees regarding the closure of the business. This resulted in over 400 employees pursuing a claim for a protective award. The tribunal made an award of £1.4 million. Each employee is estimated to be receiving a protective award of around £3,700.
Protective Award – What is it?
This is an award that an employment tribunal may order an employer to pay its employees if the employer has failed to inform and consult employee representatives when proposing to make 20 or more redundancies within a 90 day period.
Duty to Inform and Consult
The duty to inform and consult arises where the employer proposes to dismiss as redundant 20 or more employees, at one establishment, within a period of 90 days or less.
The duty requires employers to inform and consult with elected employee representatives of the affected employees. This means that unless an employer already has a recognised body of representatives, it will have to appoint employee representatives to consult with as part of the overall redundancy exercise. There are statutory election rules that will need to be followed by the employer when electing representatives.
The consultation must begin in ‘good time’. The following minimum periods apply:
- For less than 100 redundancies, consultation must begin at least 30 days before the first dismissal takes effect; and
- For 100 or more redundancies, consultation must begin at lease 45 days before the first dismissal takes effect.
Breach of duty
If an employer fails to comply with the rules on informing and consulting, or the election of representatives, it can lead to a protective award being ordered by the tribunal against the employer.
The tribunal will award an amount which it considers to be ‘just and equitable’ in the circumstances but this is subject to a maximum. The maximum award is 90 days’ gross pay per affected employee. The statutory cap on a weeks’ pay does not apply.
A 90 day protective award may be deemed appropriate where the employer, being unaware of its legal obligations, had undertaken no consultation.
The collective consultation provisions can be found under the Trade Union and Labour Relations (Consolidation) Act 1992 but they are complex. Getting it wrong could have considerable consequences for employers.
As such, if you are an employer and you are considering making 20 or more employees redundant, then you should obtain legal advice on the process to be followed.