Lisa Gettins, equity partner for employment at BPE, advises on the importance of strategic redundancy planning and the HR1 form.
Sadly all too many manufacturers are familiar with the concept of the HR1 form and requirement for its completion.
The statutory requirement to notify the Secretary of State for Business, Innovation and Skills (BIS) if an employer proposes making 20 or more redundancies during a 90 day period at one establishment has been in existence since 1992.
The recognised way of doing so is by completion of the HR1 form.
Theoretically, failure to notify has always had the potential to attract criminal charges, but in reality, the filing of the HR1 has become an administrative function given little thought.
So it was surprising when the former directors of City Link were charged with criminal proceedings.
The newspapers were quick to highlight what was seen to be a victory for the “common man”, those workers affected by the collapse of their employer, who were made redundant with little or no notice.
The legislation requires that criminal proceedings can only be brought for a failure to file a HR1 with the consent of the Secretary of State. BIS prosecutors alleged that no HR1 form was filed by the USC or City Link.
Both companies quickly entered liquidation following the announcement of redundancies. The judge dismissed the charges against the three defendants.
The Government often has to pick up the bill for compensating staff through the National Insurance Fund in cases of liquidation.
In this case, it was estimated to have cost the taxpayer more than £750,000. Unsurprisingly, the Government wishes to clamp down on such a practice.
To complicate matters further, it is now for the Court of Appeal to determine whether the obligation to consult collectively arises when an employer is proposing to make a strategic business that will foreseeably lead to collective redundancies, or whether that obligation only arises once the employer has made the strategic decision and is proposing redundancies, making it unclear when the obligation arises, but criminal charges can ensue if the obligation is not met.
It is the ultimate responsibility of the directors to ensure proper procedures are followed.
Directors need to be made aware of their obligations and HR teams need to ensure that the approach to redundancy consultation is strategic and up to date with current, changing, case law obligations.