The newspaper headlines last Saturday concentrated on the fact that due to a finding of an Employment Tribunal the taxpayer was going to have to pick up a bill of £67m to pay out awards to the employees of Woolworths who were made redundant in 2008.
What the story highlights is the substantial expense which can fall on an employer if they fail to carry out their duty of consultation with employees surrounding redundancies.
What is not generally known is that a failure to consult by an employer can lead to an application to an Employment Tribunal whereby the Tribunal will make what is known as a protective award against the employer for a failure to consult. Employment Tribunals can, and will make such protective awards for up to a total of 60 days pay per person. Although pay is limited to a figure of £400 per week (this is varied annually) this still amounts to 12 weeks pay and consequently an employer can be landed with an award of £4,800 for each employee he has dismissed without consultation. If there are a significant number of employees this can soon add up to a very large payment, in the Woolworths case £67million.
The rules relating to consultation and the remedy of a 60-day protective award also apply to the duty to consult in relation to a transfer of undertaking (TUPE transfer) where one business buys another or where a business is transferred as a going concern to a new owner in any circumstances, e.g. where the business fails. The duty to consult in such situations is little known. It is a significant bear-trap for the unwary.
I have written at more length concerning TUPE transfers generally and my article on this can be found on our website www.phrsolicitors.co.uk