Law: Job losses and Rice Krispies don't mix

Our Learned Friend

ANNOUNCEMENTS OF mergers and the resulting possible redundancies are broadcast every day. They are seen as a fact of business life, and necessary in an economic climate where consolidating and dominating the market is the way to survive and thrive. But the merger in 1996 to create the insurance company Royal & SunAlliance has caught the attention of the press for a different reason.

The MSF union (Manufacturing, Science and Finance) is claiming that it was insufficiently consulted when their employers implemented mass redundancies. It goes on to say that when job losses were announced by Royal & SunAlliance, the first that employees heard of it was on the BBC Radio 4 Today programme - which later led the exercise to be called the "Rice Krispies redundancies".

The employment tribunal proceedings are still continuing, and the money at stake is an award covering each employee for a maximum of 90 days' pay in addition to any termination monies they received on redundancy.

With more than 5,000 jobs at stake, the claim amounts, potentially, to millions of pounds.

The union claims that any subsequent discussions were a sham because the company had announced approximate job losses.

Although it is inappropriate to comment on the case itself while it is continuing, with mergers being announced every week there are points to note that may avoid others having to hear similar news over breakfast - and may forestall future litigation.

The law on consultation and information on mass redundancies is one of the lesser known areas of employment law. Although the 1975 EC directive that introduced the first legal code requiring employers to inform and consult employee representatives on mass redundancies appeared to be fairly innocuous, over the years it has been improved and made stricter.

Now, under the 1992 Trade Union and Labour Relations (Consolidation) Act, if any employer proposes to make 20 or more employees redundant at any one establishment, then consultation has to begin in good time; and if 100 or more employees are to be made redundant, then it has to be at least 90 days before the first dismissal is made and, in other cases, 30 days.

And that consultation process has to include ways of avoiding dismissals, reducing the numbers of employees to be dismissed and mitigating the consequences for the workers who have lost their jobs. The whole process has to be undertaken so that agreement is reached with the employees' representatives.

Although just announcing the expected number of redundancies does not in itself constitute a breach of those provisions, it is absolutely clear that once the process is under way, consultation on redundancies must be meaningful, and be carried out in good faith.

And, perhaps because of the fall in trade union membership over the last two decades, since 1995 these provisions have applied not only in relation to recognised trade unions but to every workplace. If there is no recognised trade union, you must deal with the elected employee representative.

Essentially, the wheel has turned almost full circle, imposing more and more rules on employers, and there is more to come. In the spring, the Department of Trade and Industry will publish new regulations which will toughen employee representatives' rights, and these will include the right to take time off to train for that role.

Looking even further ahead, the recently published draft European Directive on National Works Councils will mean that employers will have to consult such councils on plant closures and redundancies. In its present draft form, if that duty is broken, one sanction is to nullify the entire redundancy programme.

This is an age of increasing employee involvement, and employers will have to wake up to that or risk viewing future merger and redundancy announcements as the beginning of expensive and time-consuming litigation.

Dr John McMullen is national head of employment law at Pinsent Curtis