June 26, 2013

Redundancy and failure to collectively consult

The company was advised by its accountants that unless it reduced its costs it was at risk of trading whilst insolvent. The quickest way to reduce its cost was to make the employees redundant with immediate effect since it was unsuccessful in obtaining an overdraft. Consequently the requirement for a 90 collective consultation period was not complied with on the basis of the company needing to reduce its cost to avoid potentially trading whilst insolvent.

The employees were successful in their Employment Tribunal claims. However the EAT overturned the decision to make the award for 90 days and reduced it to 60 days. It held that the Tribunal should have looked into the circumstances as to why the employer had not consulted for the required period and taken into account the mitigating factors. The EAT held it would have been wrong in the circumstances to expect the employer to carry out a full 90 day consultation process. However no consultation at all had taken place and so clearly the employer should be liable for some award. On this basis the EAT reduced the award to 60 days.

This case is a clear example that, where appropriate and relevant, a Tribunal should take into account mitigating circumstances and why the employer did not consult for the required period in determining the level of a protective award made.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.

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