What not to do for collective redundancies
When redundancies of 20 or more individuals are needed, employers must follow clear rules outlined in the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) to ensure affected employees are collectively consulted. Regulations mandate organisations to complete a consultation process of no less than 30 days when making 20-99 people redundant at a single establishment within a 90-day period, and no less than 45 days when considering 100+ redundancies. As part of this collective consultation, employees have the statutory right to appoint representatives and employers must submit an HR1 form to the Secretary of State as notification of proposing to dismiss as redundant 20 or more people.
However, in the case of Carillion v Benson and others, the construction organisation stopped work immediately on several projects when it went into liquidation in January 2018 and the staff were subsequently dismissed by reason of redundancy without any prior consultation. Trade union Unite represented 263 members to seek protective award compensation of up to 90 days’ gross pay per employee due to Carillion’s failure to inform and consult, in line with TULRCA penalties.
Carillion argued that special circumstances applied to this redundancy situation, meaning it was not reasonably practical for them to comply with their consultation obligations. They explained that the sudden liquidation of the organisation was due to an unexpected decision from the Group’s key stakeholders not to approve proposed short-term lending arrangements. They had instead anticipated this decision to be acceptable, allowing them to continue solvent trading under its wider long-term business plan. However, the Board was left with no option but to place various Group companies into compulsory liquidation. The Carillion Group liquidation is described as the largest and most complex insolvency of its kind in UK history.
The Employment Tribunal and Employment Appeal Tribunal considered the key precedent of Clarks of Hove Ltd v Bakers’ Union when determining whether Carillion satisfied the application of special circumstances. They understood that “special” in this context meant something uncommon or out of the ordinary. Specifically, it applied the reasoning that a sudden disaster making it necessary to close the concern will be something capable of a special circumstance. But, if the insolvency is due to a gradual run-down of the company, the tribunal can come to the conclusion that the circumstances were not special.
It is clear that Carillion were experiencing serious financial difficulties and were on a downward path from July 2017 until its liquidation on 15 January 2018. As such, the ET and EAT agrees that the Group’s financial difficulties, and subsequent closure, were not uncommon. A 7-week hearing has been arranged for 2022 in which a decision to award employees a protective award for the failure of Carillion to inform and consult, will be made.
It's important for all organisations to adhere to their legal obligations in collective redundancy situations, to avoid the risk of length and costly tribunal claims being made.