Retales™: Failure to consult over redundancies can prove costly

According to reports from The Bookseller, an Employment Tribunal has awarded over 230 former Borders UK employees the maximum 90 days' pay following the company's failure to collectively consult over redundancies. Although Borders had gone into administration, this case is relevant not only to retailers in administration but also to retailers facing store closures and large-scale redundancies.

Some retailers, coping with the pressures of increasing costs and declining sales, may overlook the legal requirements to undertake collective consultation. The law requires employers to collectively consult appropriate representatives of employees if they are "proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less". This requirement gives rise to a number of issues, for example, what is "proposing to dismiss" and what constitutes an "establishment"? Employers need to consider these issues at the outset, as deciding if, and when, the obligation to collectively consult employees arises requires careful thought. Getting it wrong is likely to have major financial implications.

Employers who fail to consult may have to pay affected employees up to 90 days’ pay (the statutory cap on a week's pay, which is currently £400, does not apply). Although, in this case, Borders had closed down and the award will reportedly be made out of state funds (where the statutory cap does apply), this case still serves as a valuable reminder that a failure to consult can be particularly costly for employers with a large workforce.

If you would like further guidance on collective redundancy consultation, please contact Nick Thorpe, Employment Partner.