In its response to its consultation on the collective redundancy rules, the Government has announced that the current 90-day minimum consultation period where employers are proposing to make 100 or more redundancies at one establishment will be reduced to 45 days. The Government believes that this will give businesses the flexibility to respond to changing market conditions and to restructure more effectively, and ensure that employee uncertainty is not unnecessarily prolonged. In addition, it will legislate to exclude the expiry of fixed-term contracts from the scope of the rules and introduce new non-statutory Acas guidance to help employers deal effectively with the key issues arising in the context of collective consultation.
In settling on 45 days, the Government rejected employers’ calls for a 30-day minimum consultation period, recognising concerns that less responsible employers will treat the consultation period as a maximum instead of a minimum. Furthermore, it acknowledged the stance taken by trade unions that a longer consultation period gives employees more pay and more time to find alternative training or employment opportunities, but reiterated its belief that this is not the consultation period’s primary purpose.
The Government also accepted the uncertainty that employers, particularly those in the higher education sector, face over whether fixed-term contracts which have reached the end of their natural life trigger a requirement to conduct collective redundancy consultation. To address this, it has decided that fixed-term contracts which have reached their agreed termination point will be excluded from collective redundancy consultation obligations, using an exemption allowed for in the EU Directive on Fixed-term Work (No.99/70). To qualify for the exemption, a fixed-term contract must have a clear termination point. Furthermore, the exemption would not apply where the employer is considering early termination of the contract as a result of redundancy. The Government believes that the change will not lead to an increase in the use of fixed-term contracts or to widespread abuse.
However, union suggestions that the 20-employee threshold for redundancy consultation should be removed and the ‘establishment’ test replaced with an ‘undertaking’ test were rejected. The Government considers the 20-employee threshold to be an important exemption for small businesses ‘which often need to restructure quickly in response to changing market conditions’, and finds that ‘undertaking’ has a specific meaning in EU law which is not appropriate in the context of collective redundancies.
The Government reiterated its assertion that it is neither legally nor technically possible to introduce a definition of ‘establishment’ into legislation. However, it believes that the problems of determining an establishment will be ‘less acute’ with a 45-day period than a 90-day one as ‘the implications of a decision about whether a consultation is for 20¬–99 redundancies or 100+ will be less’. Moreover, the ‘establishment’ issue will be specifically addressed in non-statutory Acas guidance, which will refer to, and explain how, the following factors might impact on the definition of ‘establishment’:
• geographical location
• management structure
• management or financial autonomy
• cohesion of the workforce
• nature of the work undertaken or type of service provided
• contractual relationship between employer and employee, and
• the level within the company at which the decision to dismiss is taken.
To help employers deal effectively with the consultation process, the Acas guidance will also address the principles and behaviours underpinning good quality consultation.
The Government intends that the amended legislation and accompanying Acas guidance will be in place for the common commencement date of 6 April 2013. It will review the operation and impact of the shorter statutory consultation period on the labour market once it has had ‘time to see its full effect’.