Consultation, consultation, consultation

Jun 12 2007 By The Journal

Apart from being good industrial relations practice, consultation is in many cases a statutory requirement, with failure attracting severe penalties. Here, Julie Bruce, head of employment at Business Law firm Endeavour Partnership, sets out some key situations in which consultation obligations arise.

ON THE TRANSFER OF A BUSINESS OR A SERVICE

Employers buying, selling or merging a business (other than via a share sale) must comply with strict consultation obligations.

NB These obligations also apply when a service provider is changed, for example, a cleaning contract is ended with one provider and awarded to another or taken back in house.

Legislation

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

With

All affected employees. Of both the seller/transferor and buyer/transferee.

Strictly speaking, consultation should be with employee representatives. If a union is recognised, consultation must be with that union.

Why/what about

To inform employees of when the transfer is to take place, the reasons for it and its legal, social and economic implications and, most importantly, to consult on measures the employer envisages taking in connection with affected employees.

When

In good time to enable effective consultation to take place. No time limit is prescribed, but it must permit employee reps time for an opportunity to consider, liaise with employees and formulate a response.

Penalty

Up to 13 weeks' salary per affected employee.

Comment

Both seller and buyer must inform and consult affected employees in their own workforces. "Affected employee" does not just mean those transferring; it could include a member of the buyer's staff whose job will change because of an incoming employee from the seller.

Examples of "measures" - redundancy, a change to working practices:

ON REDUNDANCY INVOLVING 20 OR MORE EMPLOYEES

Legislation

Trade Union and Labour Relations (Consolidation) Act 1992

With

With union/employee reps where employer proposes to dismiss 20 or more employees (even if ultimately they do not dismiss that many) within 90 days.

Why/what about

To set out the reasons for the redundancies, the groups of employees affected, proposed methods of selection, how long the process will take, calculation of redundancy pay. Must be given in writing.

When

Redundancy of 20 employees - at least 30 days before first dismissal.

Redundancy of 100 employees - at least 90 days.

Penalty

Up to 90 days pay per affected employee.

Comment

Important to remember the associated duty of notification to the Secretary of State.

NB This obligation does not replace the need to consult individually with an employee. Under fair dismissal principles, an employer must consult an employee before deciding to make that employee redundant. This is particularly about exploring ways to avoid redundancy, for example by considering alternative positions, and also giving an employee an opportunity to comment on his selection scores, etc.

Penalty for failure - an unfair dismissal claim with a basic award (max £310 per year of service) and compensatory award (max £60,600).

ON BUSINESS MATTERS/CHANGES

Legislation

The Information and Consultation of Employees Regulations 2004 (ICE)

With

Currently - employees in businesses with 100 or more employees.

NB From April 2008 extended to businesses with 50 employees.

Why/what about

To inform/consult on anything of substantive interest on the business, for instance, the economic situation, development, decisions that might lead to substantial changes.

When

When 10% of the workforce requests the business to enter into an information and consultation agreement.

Penalty

Maximum of £75,000 - for failure to hold a ballot or comply with the terms of an agreement.

Comment

It is worth noting that there is no freestanding obligation on employers to consult under ICE. It is only triggered if 10% of employees request it.

Employers can submit that a current consultation agreement with employees is sufficient to meet the requirements under Ice.

The above summarise just three areas in which obligations to consult arise. Others, in connection with health and safety, pensions, collective bargaining and training exist, but are beyond the scope of this article.

It is critical to note, however, that consultation requirements permeate all aspects of employment. For example, an employer who does not consult an employee in respect of their sickness, capability/performance, request for flexible working or to work beyond retirement age runs the risk of an unfair dismissal, constructive dismissal or a discrimination claim. Finally, and significantly, new statutory procedures brought in in 2004 require employers to consult before any decision is taken to dismiss an employee with (currently) more than one year's service (including the mere ending of a fixed-term contract).

These require a minimum three-step process encompassing a meeting with the employee and a right of appeal.

The penalty for failing to comply with this - automatic unfair dismissal and an increase in compensation awarded by 10-50%.

There are very good reasons therefore (both of the carrot and stick variety) to make full engagement with employees an everyday part of working life

* Footnote: These are just a summary of certain aspects of employment law and should not be taken as a substitute for obtaining specific legal advice in respect of individual facts or circumstances.