Advising on restructuring and redundancies process at an automotive manufacturer

We were recently approached by an existing automotive client regarding the UK impact of a worldwide restructuring programme.  The client is the UK subsidiary of a global car manufacturer.  The head corporation is ploughing substantial resources into research and development regarding electric cars and as a result needs to trim its workforce to cut costs.

This had resulted in directives to the European subsidiaries to carry out restructuring to reduce their workforce.  This restructuring is expected to take place over 12 months and is unfortunately expected to lead to a large number of UK redundancies.

We have advised the client on its obligations regarding collective consultation with employee representatives regarding the restructuring, as well as its obligations to the individuals in relation to individual consultation, exploring alternative employment and carrying out a fair redundancy dismissal.

Given the need for cutbacks, the client is not in a position to offer generous redundancy payments and so needs to ensure that all dismissals are carried out fairly in accordance with local legislation.

As more than 20 redundancies are proposed within a 90 day period, the client must comply with collective consultation rules.  As there is no formal trade union recognition, the client must facilitate the election of employee representatives.  Once in place, the representatives’ must be given certain prescribed information about the restructuring and then consulted with about the proposals.

The consultation must begin when the business is proposing to make redundancies. This means that consultation must start when proposals are still at a formative stage.  If the business has already decided to make redundancies by the time it starts collective consultation, it will be in breach of these requirements.

The business must also notify the Secretary of State for business of the proposed redundancies.

The penalties for failing to comply with any of the above collective consultation obligations are very severe; up to 90 days gross pay per employee concerned. Also, it is a criminal offence to fail to provide notification to the Secretary of State.  To date our client has managed to successfully navigate this without any claims being made or seriously threatened.

The legal requirements when more than 20 redundancies are planned are much more onerous compared to smaller scale redundancy exercises, and the penalties for non-compliance are quite penal.  It is important that employers considering large scale redundancy or restructuring exercises take advice early on to ensure that the correct process is followed, particularly in the transport sector where there is a high level of trade union recognition.  Unions will be well informed of the position and will expect to be briefed about proposals for restructuring well in advance of them being implemented.