The Trade Union and Labour Relations (Consolidation) Act 1992 was brought in to more fairly regulate the employment relationship, with particular focus on the involvement of trade unions. Part of this Act relates to the protection of employees in large-scale redundancies.
The general rule, contained in section 188 of the Act, is that where an employer is proposing to dismiss a redundant 20 or more employees within a period of 90 days or less, the employer must undertake a formal consultation with the employees’ representatives with a view to securing an alternative or avoiding the redundancies altogether.
Part of this formal process involves written notification to the Secretary of State, by means of a Form HR1, of the redundancy proposals at least 30 days before the first dismissal is due to take effect. Under section 194, failure to comply with this requirement is a criminal offence and may result in an unlimited fine for the employer or, importantly, any ‘director, manager, secretary, or similar officer’ who consented or connived in the failure to give notification. If, however, there are special circumstances that render it unreasonable for an employer to comply with this requirement, they must in any event take such steps as are reasonably practicable in the circumstances in order to comply.
There have been very few criminal proceedings brought under section 194 of the Act however there are a couple of cases worth noting, the most recent of which highlights the importance of compliance.
Both cases arose in the context of insolvency, and the conflict between employee retention and the need to act in the interests of the creditors when a company enters administration. In the first case, the Secretary of State initiated proceedings against 3 former directors of City Link for their failure to notify the Secretary of State of the company’s plans to make staff redundant, but ultimately they were acquitted on the basis that, in the court’s view, they had never taken a decision to make staff redundant in the first place.
Most recent case
The most recent case of Palmer v North Derbyshire Magistrates Court however, is a stark reminder to employers of the consequences of the failure to comply with section 193 of the 1992 Act. In this case, a director (Mr Forsey), and an administrator (Mr Palmer) failed to submit a Form HR1 within the relevant time period and were thus in breach of the provisions of the 1992 Act. Mr Palmer argued that, as an administrator, he could not be held individually liable for the failure to notify in the same way as a director. The court held, however, that an administrator is ‘undoubtedly carrying out a managerial function in place of the directors’, and thus ought to be individually liable. Proceedings are now beginning against Mr Palmer and he could be facing fairly serious criminal sanctions. It is therefore essential that employers or administrators seeking to proceed with large-scale redundancies submit the Form HR1 to the Secretary of State as a matter of urgency. In light of the Palmer judgement, failure to do so could result in serious criminal penalties for not just the companies, but the individuals tasked with their management.
If you require advice about any of the issues highlighted, please contact a member of the Blackadders Employment Team working in Aberdeen, Dundee, Edinburgh, Glasgow, Perth and across Scotland.
Ethan Laing, Trainee Solicitor
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