What to consider during periods of business transformation

3 Jan 2019 By Mark Kaye

Being aware of consultation obligations is key to a successful restructuring programme, says Mark Kaye

With Brexit looming, many organisations are assessing their existing structures and deciding whether their current business model will be fit for purpose in a post-Brexit world. Options may include closing down certain aspects of their UK operation and possibly offshoring them either within or outside the EU. Such change programmes require careful forward planning along with an effective communication strategy.

From a legal perspective, a UK closure and offshoring may trigger the application of both the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and the Trade Union And Labour Relations (Consolidation) Act 1992 (TULR(C)A). Both pieces of legislation require consultation. If there is a recognised trade union in place which covers the affected employees, that body must be consulted. If there is no trade union (or if it does not cover all affected employees), employee representatives must be elected.

Collective consultation

TUPE consultation would apply in the context of a transfer of a business or service. While it should not be ignored, it can usually be run alongside any TULR(C)A consultation process. The TULR(C)A consultation process will be triggered if the employer is proposing to make 20 or more redundancies at one establishment within a 90-day period. The process should run for at least 30 days prior to the first dismissal and, if it is proposed that 100 or more employees may be made redundant, the consultation process should run for at least 45 days prior to the first dismissal. The process itself should be meaningful and should be more akin to a negotiation – the employer should demonstrate a willingness to consider altering its plans if a workable solution is proposed.

The obligation to consult is triggered as soon as the employer is proposing to make redundancies. Care should be taken to avoid any delay in commencing the consultation process. Trade unions, in particular, will often seek to argue that the employer has breached its obligations under TULR(C)A by failing to begin the consultation process as soon as it is at a proposal stage. A successful claim by a trade union (or the elected representatives) on this issue can be very damaging for the employer, both reputationally and financially. The employment tribunal can make a protective award of up to 90 days’ gross uncapped pay per affected employee.

Individual consultation

Collective consultation is only one area that needs to addressed as part of a business change programme. Employees who have two years or more service will have the right to claim unfair dismissal. This means that HR will need to ensure that potentially redundant employees are properly pooled, fairly selected and consulted on a one-to-one basis. In addition, the employer must consider whether there are suitable alternative roles elsewhere in the group. All of these issues will be further complicated in the event of a TUPE of the business or services and consideration will need to be given as to whether the transferee should be involved in the redundancy consultation process. Typically, the dismissals will be handled by the transferring employer, but this is not without risk and should only take place with the agreement of all parties. Often, a settlement agreement with the employee will provide the parties with protection against later claims that the process was not legally compliant.

Plan, engage and communicate

The key to a successful business change programme is to ensure that there is a carefully planned strategy in place with early engagement between all stakeholders and a process that is fair, transparent and meaningful.

Mark Kaye is a senior associate at Bryan Cave Leighton Paisner LLP

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