It’s an unfortunate fact of life that charities undergo organisational changes. This is often due to failing to get renewed funding, tighter budgets or the expiry of a grant or contract, which can lead to a redundancy situation.
Redundancy situations are never a pleasant experience, but if your charity does not follow the correct procedure, especially in regard to collective consultation requirements, you could find yourself having to defend a very expensive Employment Tribunal claim.
This is what the charity, Keeping Kids Company (KKC), has unfortunately experienced first hand.
Facts of the case
KKC ran into some financial difficulty in 2014.
On 12th June 2015, KKC applied to the government for a grant, laying down its plan to restructure the company. It stated that about over 50% of the employees would be made redundant, but it did not specify which posts would be affected. It was clear that without this grant, KKC would have to enter into administration or follow some other insolvency procedure.
On 29th July 2015, the government accepted their application and released the funds.
However, on 30th July 2015, there was publicity concerning a police investigation into safeguarding issues. This led to the grant agreement being terminated and the demand for the immediate repayment of the unspent grant. KKC subsequently closed and dismissed all employees on the basis of redundancy.
Broadly speaking, section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 says that if an employer is proposing to make 20 or more employees redundant at one establishment in a 90 day period, there is a requirement to collectively consult with those employees in good time. So, if an employer is making 20 to 99 redundancies, they must consult for at least 30 days and if they are making 100 or more redundancies, they must consult for at least 45 days before dismissal.
Section 188 also says that if there are special circumstances which means it is not reasonably practicable for the employer to comply with this duty to collectively consult; the employer must take the steps that are reasonably practicable in those circumstances towards compliance. Failure to follow the collective consultation obligations can lead to claims for protective awards, which can be for 90 days’ pay per affected employee. This is aside from any claims for unfair dismissal.
The claimants argued that KKC had not complied with the consultation obligations regarding collective redundancies laid down in section 188.
KKC argued that they were waiting for a response to their grant application from the government before commencing their collective consultation obligations.
Employment Tribunal ruling
The Employment Tribunal held unanimously that the application for the grant included a relevant proposal to dismiss. The requirement to consult in good time meant that they should have started promptly after 12th June.
They said that the events that gave rise to the closing of KKC were not a special circumstance to justify not consulting.
KKC appealed the decision.
Employment Appeal Tribunal’s judgment
The Employment Appeal Tribunal held that the Employment Tribunal was entitled to find that collective consultation obligations were triggered on 12th June when they submitted their application for funding. They agreed that there was a proposal that could affect all employees and there had been an intention to dismiss for redundancy.
They also found that the Employment Tribunal was entitled to find that consultation was required to begin promptly and held that KKC had not taken all the steps towards compliance where were reasonably practicable.
It only allowed an appeal on a very narrow ground.
It is crucial that Trustees ensure that the senior management staff within their charity understand their legal obligations, have robust procedures in place to deal with potential redundancy situations and take legal advice where required to ensure compliance with the law. Failure to do so could lead to costly litigation for the charity.