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Redundancy - employer responsibilities in the sudden closure of a business

View profile for Stephen Woodhouse
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Employers rights and obligations with social media

It was recently reported that the UK retail industry suffered its worst November footfall decline in nine years. This news follows a number of major high street firms who have had to close their doors in recent months.

When such stories are reported in the media, the focus tends to be on the wider societal and economic impact of these closures. However, it is important we do not forget the impact that such sudden closures have on the individuals employed by these businesses.

In the event of a sudden closure of a business due to insolvency or company administration, employees are sometimes dismissed with immediate effect and with little or no consultation. However, where a company is making 20 or more employees redundant within any 90-day period at a single establishment, the company has a legal obligation to undertake a minimum period of consultation with those affected. The employer must notify the Redundancy Payments Service before a consultation starts.

Who must the employer consult with?

The primary duty for employers is to inform and consult with 'appropriate representatives' of the affected employees.

Appropriate representatives are usually trade union representatives. However, if there is no recognised trade union, the employer must look to appoint “employee representatives”. Often, employers have existing staff committees who, in these circumstances, may step in and act as such representatives. However, where this does not happen, a formal election may need to be held. Where there is no recognised trade union or employee representatives, the employer must consult with all affected staff individually.

How should the employer consult?

Under the legislation, the employer must disclose in writing to the appropriate representatives:

  • the reasons for its proposals
  • the numbers and descriptions of employees whom it is proposed to dismiss as redundant
  • the proposed method of selecting the employees for dismissal and
  • the method calculating the amount of any redundancy payments to be made

Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal. In cases where more than 20, but less than 100, redundancies are proposed, the consultation must begin 30 days before the first dismissal occurs.

What if the employer fails to do this?

If the company fails to meet its obligations above then you can take an employer to an employment tribunal. Here, you request the tribunal make a 'protective award' in your favour. This requires employers to pay employees their normal week’s pay for a period of time called the ‘protected period’. The tribunal has the discretion in fixing the length of that period, depending upon what is just and equitable and taking account of the seriousness of the employer’s default. Any award would be in addition to any outstanding redundancy pay and notice pay.

The maximum length of the protected period is 90 days in all cases where 20 or more are to be made redundant.

What if the employer is in financial difficulty?

Even if the employer is insolvent and does not have the means to pay the tribunal judgment, you may still be able to bring a claim against the employer and obtain compensation from the redundancy payments service.

What can I do?

If you believe that your employer has failed to comply with the above when making you redundant and would like to discuss this with a member of our team, please call us on 01616 966 229 complete our online enquiry form