Consultation procedure on redundancies and transfers reformed

In July 1999, the Labour government introduced amendments to the existing legislation on employees' information and consultation rights in the event of redundancies and transfers of undertakings. We outline the key aspects of the new provisions and assess their significance.

The Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1999 came into force on 28 July 1999 and introduced revised consultation requirements which apply in respect of redundancies and transfers taking place from 1 November 1999.

Under the UK's original statutory requirements in these areas, the right to be consulted was confined to representatives of trade unions recognised by the employers concerned and the law provided no mechanism for consulting employee representatives in the absence of union recognition (UK9708152F). In 1994, the European Court of Justice ruled that this approach did not adequately implement the EU Directives on transfers of undertakings (77/187/EEC, amended by 98/59/EC) and collective redundancies (now consolidated in 98/59/EC), prompting the then Conservative government to introduce new Regulations in 1995 requiring consultation on these issues either with representatives of recognised unions or with other representatives elected by employees.

However, the 1995 Regulations were strongly criticised, particularly by trade unions, and questions continued to be raised as to whether they fully complied with EU law. The view of the incoming Labour government in 1997 was that the 1995 Regulations "still [did] not provide a clear and satisfactory framework for the necessary information and consultation", and in February 1998 the Department of Trade and Industry (DTI) initiated a public consultation process on proposed changes to the legislation (UK9803109F) which eventually resulted in the 1999 Regulations.

Key provisions of the 1999 Regulations

The content of the 1999 Regulations closely reflect the proposals made in the consultation document and make parallel amendments to the redundancy consultation provisions of the Trade Union and Labour Relations (Consolidation) Act 1992 and the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (the TUPE Regulations).

As far as redundancies are concerned, the amendments widen the scope of statutory consultation by requiring this to take place with representatives of "employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals", rather than employees who may be actually dismissed which was the previous formulation. This broader constituency of employees to be covered by the consultation brings the statutory position into line with the corresponding provisions of the TUPE Regulations. In the context of redundancies, this change will require employers to consult over the consequential impact on "survivor" employees in areas such as work organisation and workload.

For both redundancies and transfers, the new Regulations close off the potential under the 1995 Regulations for employers to "bypass" recognised unions, by providing that where an employer recognises an independent trade union in respect of employees affected by the proposed redundancies/transfer, consultation must take place with representatives of that union. Consultation may take place exclusively with other representatives of the affected employees only in the absence of a recognised union. In this case, the employer may choose to consult either: existing employee representatives elected or appointed by the affected employees provided they have the authority to be informed and consulted about proposed redundancies/transfers; or employee representatives specially elected for statutory consultation purposes under new election rules laid down by the Regulations. The employees concerned may complain to an employment tribunal if the election arrangements used fail to comply with the law.

If the affected employees fail to elect representatives within a reasonable time of the employer inviting them to do so (eg if no candidates are willing to stand for election), the employer is required to give to each of the affected employees the same information as it would have been required to give to employee representatives.

Both lay trade union officials and other employee representatives are now entitled to paid time off for training in the performance of their duties under the statutory information and consultation provisions concerning redundancies/transfers.

In the redundancy provisions, the maximum level of the "protective award" available to employees in cases of inadequate consultation has been standardised at 90 days' pay. The ceiling on the compensation available under the TUPE Regulations has been raised from four weeks' to 13 weeks' pay.

The one potential change identified by the consultation document with which the government has not gone ahead is the removal of the 1995 Regulations' exemption from the consultation requirements of redundancy proposals affecting fewer than 20 employees. There was always a question mark over the firmness of ministers' intention to proceed with this change: the February 1998 consultation document stated only that the government "[had] it in mind" to remove the 20 redundancies threshold. Nevertheless, the retention of the status quo on this important issue represents a victory for employers' lobbying efforts, and the UK's Trades Union Congress has registered its disappointment at the government's decision.

Commentary

Recent research sponsored the DTI and carried out by the Industrial Relations Research Unit broadly supports the present government's case for the main changes made by the 1999 Regulations ("Redundancy consultation: a study of current practice and the effects of the 1995 Regulations", J Smith, P Edwards and M Hall, DTI Employment Relations Research Series, No. 5, 1999), as follows.

• It is clear that employers who recognised unions rarely if ever resorted to "bypassing" them in favour of consulting via non-union, elected representatives. Most employers contemplating the difficult issues raised by a redundancy were likely to use established channels of consultation rather than risk exacerbating the problem by choosing another route.

• The researchers' case studies showed that, though not without its limitations, consultation over redundancies conducted via union representatives, and in one case via specially elected employee representatives, did "make a difference" in terms of influencing the handling (though not the principle) of job losses.

• However, in only one of three non-union case study companies were representatives actually elected to meet the consultation requirements. The other two companies consulted on an individual basis. The provision in the 1999 Regulations that an "individual" route may be followed by employers if an invitation to elect employee representatives is not taken up by employees is, in practical terms, likely to be among the most significant aspects of the new requirements.

• The research indicated that some employers were uncertain as to their statutory obligations under the 1995 Regulations, and suggested that the previous government's "minimalist" approach to the regulation of the necessary consultation, intended to be business-friendly, may in practice have proved counter-productive (eg the absence of more specific guidelines on arrangements for electing employee representatives). The Confederation of British Industry welcomed the present government's move to "clarify" the election requirements.

Collective redundancies and business transfers are among a burgeoning range of industrial relations matters for which UK law now specifies ad hoc, issue-specific employee representation mechanisms in the absence of union recognition. Other areas are health and safety, working time (UK9810154F) and, before the end of 1999, parental leave/time off for family emergencies (UK9908123N). The European Commission's proposal for a Directive on national information and consultation procedures (EU9812135F) would, if ever adopted, signal the end for UK governments' continued reliance on such an approach for the purposes of fulfilling EU consultation requirements. UK companies may in any event increasingly be prompted to consider dealing with such issues via a permanent, standing consultative body. (Mark Hall and Paul Edwards, IRRU)