Failure to comply with the obligation to inform and consult employee representatives about collective redundancies can lead to a protective award of up to 90 days' pay per employee being awarded. The recent case of AEI Cables Ltd v GMB confirmed the approach which Tribunals should take when deciding the level of a protective award.
AEI Cables Ltd was advised that unless it reduced its costs quickly there was a risk that it would face criminal liability for trading whilst insolvent. Soon afterwards the bank refused to extend the company's overdraft, and 124 employees were made redundant with immediate effect. The employees brought successful claims in the Employment Tribunal for protective awards. Finding that there had been a complete failure to inform and consult, the Tribunal ordered the maximum award of 90 days' pay per employee. AEI appealed, arguing that there were mitigating circumstances for its failure to consult. The EAT held that the Tribunal should have taken account of the fact that AEI could not lawfully carry on trading. It also considered that AEI could have made greater efforts to consult even in the limited time available. Accordingly the EAT reduced the protective award from 90 days to 60 days.
This decision confirms that when deciding the level of a protective award, Tribunals should look at the seriousness of a breach and the reasons why employers have not complied. Employers facing insolvency may have little choice in practice but to make redundancies without any collective consultation if immediate cost savings are required, and Tribunals may avoid making the maximum protective award where these circumstances apply. In this case the EAT still awarded 60 days' pay to each employee, indicating that even where the timescale is extremely tight, employers should make every attempt to inform and consult employee representatives. If greater efforts had been made in this case, the award might have been further reduced.
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