You only have to look around to see how Covid-19-induced lockdowns have facilitated the collapse of some major high street brands, ushering in huge levels of job losses.
Sadly, we have already seen thousands of workers laid off. But it’s highly likely we will see many more redundancies still, and with this comes a rising risk for embattled employers to litigation group actions from former-staff, especially if the redundancy process had not been handled properly.
Mass claims, or class actions, are not just for high court litigation. Any court can manage claims by multiple claimants by using its case management powers. The employment tribunal system is no exception and has a process whereby two or more claimants can make one claim if their claims “give rise to common or related issues of fact or law of if it is otherwise reasonable.”
Mass redundancies naturally lend themselves to this sort of collective action: the statutory consultation is, in itself, collective in nature and the employees are treated as a group; often all let go with immediate effect or very little notice. The damages available to the employees here are also potentially punitive. The tribunal itself can identify lead claimants as a test case to establish liability, and its decision (subject to any application by a party), will be binding on each party in any related cases.
Mass redundancies can, of course, be related to the employer’s own economic collapse. In an insolvency situation, litigation is complicated by a ‘stay’ on proceedings without the consent of the administrator or the court itself. Leave will, however, be grated if the claim is 'unlikely to impede the achievement of the purpose of the administration' and the Employment Appeal Tribunal (EAT) has commented that consent should only be refused in rare cases for unfair dismissal and redundancy claims.
Insolvency issues
It is vital that employers do the best they can to consult with staff, even if facing the prospect of insolvency.
Many employers, often wrongly, assume that the threat of insolvency amounts to 'special circumstances' and so eclipses the need to consult collectively. Not true.
Calling in the administrator does not absolve an employer of its statutory obligations around collective consultation, while insolvency is not of itself a special circumstance. While it may be a mitigating factor, the employer still needs to demonstrate a genuine attempt to consult with its workforce. An employee can claim a protective award, which is a sanction, not dependent upon proving loss, of up to 90 days’ pay per employee which is a preferential debt in any insolvency proceedings, up to a threshold amount.
Remuneration under a protective award is also payable by the National Insurance Fund (NIF), where the employer is insolvent. However, the NIF will not guarantee payment or a protective award, or a basic award for unfair dismissal purposes, unless liability has first been assessed by a tribunal. This is why the employee will always consider bringing employment tribunal claims in these circumstances. Finally, all employers mustn’t forget that a HR1 - advance notification of redundancies - form has to be filed with the Department for Business, Energy & Industrial Strategy. Failure to do so is a criminal offence.
Jules Quinn is a partner at King & Spalding
