In recent weeks, two tech giants have started large-scale redundancy exercises. Twitter notified 50% of its staff of layoffs by email in what has been described by some as a digital P&O dismissal, and Meta announced cuts of 13% of its workforce. With recession now a reality, this is unlikely to be the end of redundancies in the tech sector. How, then, can employers get it right?
Despite the reported approaches to the redundancy exercises carried out this week, the UK does have stringent guidelines on how employers should carry out large-scale redundancies, which must be adhered to if they are to avoid the risk of significant penalties.
The general rule is that if an employer is proposing to make 20 or more employees redundant in any 90-day period, it is required to follow the collective consultation requirements set out in legislation. This involves consulting for a minimum timeframe with representatives of employees affected by the redundancies.
If there is no trade union or representative body in place, employers must carry out an election process to appoint employee representatives. There is no minimum election period, but employees should be given sufficient information about the process, how to nominate candidates and how long the elections will take.
Once appropriate representatives are in place, employers can commence consultation. Where an employer proposes to make between 20 and 99 employees redundant, consultation must last for a minimum of 30 days before the first employee is dismissed. If it proposes to make over 100 people redundant, this time limit increases to 45 days.
Consultation must take place while proposals to dismiss are at a formative stage. Dismissals should not be pre-determined. This does beg the question of whether a firm-wide email and decision at the outset to suspend access to offices and IT systems is indicative of no decision having been made prior to consultation.
The purpose of consultation is to inform representatives of the proposals, explore ways to avoid or reduce redundancies, and mitigate the impact of the dismissals on the workforce. In addition to collective consultation, individual consultation must also take place.
Although legislation does provide a defence for employers that because of “special circumstances” have not been able to comply with collective consultation legislation, this can only be relied upon in exceptional circumstances. This would usually apply in sudden or unforeseen situations. The bar for this defence is extremely high and should not be readily relied upon.
Whether or not collective consultation is required, employers must ensure they carry out a fair redundancy process in order to minimise exposure to possible unfair dismissal claims. The amount of compensation awarded for unfair dismissal claims is up to one year’s pay or the statutory cap (currently £93,878).
Where collective consultation is required and employers fail to adhere to the regulations, they run the risk of liability for additional claims for compensation of up to 90 days’ pay per affected employee (known as a protective award). If an employer faces multiple claims, this can easily add up to a sizeable sum.
Finally, there is also potential criminal liability if employers fail to give the secretary of state requisite notice of the redundancies.
The reputational impact of getting redundancies wrong should not be underestimated. Twitter has already been heavily criticised in the press for alleged failures and its treatment of staff. If there is anything to take away from the events of recent weeks, it is the need to properly manage what will be, in anyone’s book, a difficult, emotional and reputationally risky exercise.
Remy Ormesher is an associate and David Israel is a partner in the employment law team at RWK Goodman.