Consultation or criminal charges – when redundancies go wrong

Managing the redundancy process, particularly around consultation is never easy, however as news reports have shown over the last few days, getting it wrong can not only be damaging to a company’s reputation it could result in criminal charges against the board of directors.

It has been reported that the CEO of Sports Direct, Mike Astley is due to face criminal proceedings against him due to the handling of the redundancies of the staff within the USC warehouse under the Trade Union Act and the failure to submit at HR1 form to the Redundancy Payment Service (RPS).  If found guilty it could result in him being banned from holding a directorship for up to 15 years and receiving a fine of £5,000.  The staff that were affected by the redundancies brought a case through the employment tribunal system as they only received 15 minutes’ notice that they were losing their jobs.  This was in spite of the fact that the executive board had been discussing the possibility of closing the warehouse with the administrators for at least two months before the announcement was made.  Fifty former staff were awarded a protective award, which is the equivalent of 90 days’ pay, in the ET.

Under the regulations it is very clear that the Redundancy Payments Service has to be notified before collective consultation takes place.  The timescales of consultation period are:

  • 20 to 99 redundancies – 30 days consultation period
  • 100 or more redundancies – at least 45 days consultation period

There isn’t a set timescale if a company is considering making redundancies of less than 20 staff, however companies still need to enter into formal and meaningful consultation with the individuals who will be affected.

It is always a difficult balance between keeping the staff informed without it damaging the performance of the organisation i.e. a reduction in orders from clients because they are worried that the company will close before completing the order.  The senior management team also need to be aware that decisions made 2 or 3 months before any formal process starts could be seen at an employment tribunal as the starting point of the redundancy process.  Therefore senior managers should be careful regarding anything that is recorded in written format including emails.

Overall companies should have open and honest communication with employees as early as possible if they are experiencing difficulties and redundancies are a consideration as employees may have new ideas on how they increase trade/profitability.

Twitter was also in the media spotlight this week for their poor handling of redundancies, relating to the way in which the staff found out they no longer had a job.  When staff tried to log on to the company’s computer system they found they were denied access, with staff posting on twitter screenshots of the message they received.  Some of the staff did receive voicemails but in the main this appears to be after they had tried to log on to Company’s system.

With flexibility working practices and people working from home or from different sites, it can be a logistical nightmare to make sure everybody is available if companies have to make an announcement regarding the possibility of redundancies.  However, every effort should be made to make sure all staff effected are spoken to at the same time.  This may mean having several meetings being held at different locations or using technology such as Skype for the remote workers.  Companies also need to consider how they are going to contact staff who are off long term sick or on extended leave such as maternity.

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