Collective redundancies

The Labour Party promised to lay an Employment Rights Bill (the 'Bill') before Parliament in its first 100 days in power and it did so on 10 October 2024.  It is the most ambitious set of employment law reforms for more than a generation and it is difficult to think of an area of employment law that will be untouched.  

Whilst the Bill is very lengthy, much of the detail has yet to be worked out.  The Government expects to begin consulting on the reforms in 2025, anticipating that the majority of them will take effect no earlier than 2026.

The Bill proposes an extension of the number of situations in which collective redundancy consultation will be required and the Government has suggested much higher penalties for failing to follow the rules. 

Currently, employers proposing redundancies are required to consult employees collectively and to notify the Secretary of State if they propose to dismiss 20 or more employees in a 'single establishment' within 90 days.  

'Redundancy' for this purpose is defined broadly as 'dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related'.  This means 'fire and rehire' dismissals will often fall within the definition.

There is currently leeway for employers to argue that redundancies at different locations (e.g. different sites, or shops) are at different establishments, not a single establishment.  This will end, as the Bill removes the 'single establishment' limitation – so redundancies held within 90 days in different locations will be caught by the collective consultation provisions.  While this will create more certainty, it will also increase the circumstances in which collective consultation will be required.  

The Government has also stated that it is 'committed to consult on lifting the cap of the protective award if an employer is found to not have properly followed the collective redundancy process as well as what role interim relief could play in protecting workers in these situations'.  

A commitment to consult is, of course, not the same as a commitment to implement.  Protective awards currently amount to up to 90 days (uncapped) pay per employee.  Lifting the cap (which could mean increasing it or getting rid of it altogether) seems drastic given it is not based on the employee's loss, so employers are likely to push back hard during any consultation about it.  Interim relief (which is mainly used in whistleblowing claims at the moment) allows a hearing at short notice at which the Employment Tribunal can issue 'a continuation of contract order' so that the employee is paid while the claim proceeds.  This will be a useful tactic for employees if it is implemented, but – again – is likely to be resisted by employers during any consultation.  Watch this space.