• Employers ‘risk millions’ in damages over consultation failings

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  • 4 Mar 2016
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Lawyers warn troubled businesses to engage staff following £6.25 million payout to former steelworkers

Employers must consult with their staff over potential redundancies, even when the end result is inevitable, employment lawyers have urged – or risk a multimillion-pound bill if their actions are found wanting.

The warning comes after former SSI steelworkers were awarded a share of £6.25 million because of a lack of consultation after they lost their jobs when their plant in Redcar shut last year.

The judge in the subsequent employment tribunal awarded compensation to 1,100 former employees who took action through their trade union, Community. Around 2,200 people lost their jobs when the plant closed, with the remaining former staff bringing cases separately through Unite and the GMB.

A spokesperson for Community said the judge had made the award because there had been "no consultation at all". Under a European directive, employers are obliged to consult with employee representatives when considering dismissing 20 or more staff.

The directive empowers a tribunal to award a maximum of 90 days’ gross daily pay per employee. Where the employer cannot pay because of insolvency, the government has to meet the cost, which is likely to happen in the SSI case.

The Community spokesperson said the amount awarded to each individual would vary. "Some may have received some payments already for unpaid wages, and there are also deductions for any jobseekers’ allowance that has been claimed."

He urged businesses in similar positions to be aware of their legal duties. "If they know they are facing difficulty, they should be consulting with their unions or their employees at an early stage."

Andrew James, senior associate at Slater and Gordon, who worked on the case with Community, said the award had been made because there had been no consultation "despite the fact it had been clear for months that the company was in financial difficulties and there was the potential for redundancies".

He added that the situation happens far too frequently: "Instead of trying to trust staff and involving them in a way that might help the employer overcome the difficulties, decisions are made at the top level without any attempt to involve others. It is an unlawful approach, but also a short-sighted one."

James said the consultation period was designed not only to avoid the risk of redundancies, but also to mitigate their effects. "The end result may well have been inevitable, but, even if at the end the decision to dismiss everyone is the same, that is not the point.

"The obligation is about offering training, redundancy payments above the statutory minimum, allowing time off for interviews, retraining and education. It is not just about avoiding redundancies – it is about mitigating the effects of them."

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Comments (3)
  • If the government pays the bill for the insolvent employer, then that employer is risking nothing (of its own) by failing to consult. All it is doing is getting the government to fund an additional redundancy payment. If it had consulted properly its staff wouldn't have got this money so it seems like bad behaviour (non-consultation) is incentivised. Nigel

  • Would I sound cynical if I suggested that you might not care about consulting with staff if you knew you were going into receivership and the government were going to pay the compensation?

  • I don't mean to sound cynical - but why would you waste time consulting when you know your going into receivership and the government will pay the compensation!