Where companies are experiencing financial difficulties, management can often be tempted to put on a brave face to preserve staff morale and why wouldn’t you?
However, as a case concerning the final days of a defunct airline showed, there is a legal obligation to inform and consult employees if redundancies are on the cards (Clapham v Monarch Holidays Limited (in Administration) And Another).
The airline had been suffering severe cashflow problems and tumbling profits for some time. Staff were aware that all was not well but had not been informed that their jobs were at risk, and an announcement by the CEO that the company had entered administration came out of the blue. There was evidence that, on arriving at work on the day of the announcement, about 60 employees were made instantly redundant and were asked to leave within half an hour.
After proceedings were launched by one of those who lost their jobs, an Employment Tribunal (ET) noted that, by virtue of Section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992, where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer is obliged to consult appropriate representatives of those who may be affected. Such consultation must commence at least 30 days before the first of the dismissals takes effect, and that period is extended to 45 days if 100 or more employees are facing redundancy.
In upholding the worker's complaint, the ET found that there had been no attempt to consult with the workforce prior to the redundancies, nor had employees been given any opportunity to make proposals as to how the business and jobs might be saved in whole or in part. The airline's difficulties had developed over a period of about two years and it was not a case of its financial position having deteriorated so swiftly as to make consultation impossible. The likelihood was that the workforce had been kept out of the loop as the company continued on a downward spiral.
In the circumstances, the ET made a protective award to the worker equivalent to 90 days' pay, the maximum permitted under the Act. If the company were insolvent, the ET noted that the liability to pay that sum would fall upon the Secretary of State for Business, Energy and Industrial Strategy.
The manner in which the redundancy process is conducted is vitally important. Please contact Emma-Louise Hewitt for advice before taking any action on 0808 166 8860 or email your enquiry to e.hewitt@sydneymitchell.co.uk.
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