Criminal sanctions and collective redundancies

Kate Hartley

The chief executive of Sports Direct and directors of City Link were recently acquitted of criminal charges brought against them for failing to notify the Secretary of State of proposed large-scale redundancies. Whilst these directors may breath a sign of relief, the case is a powerful reminder that those who default in their Trade Union Labour Relations (Consolidation) Act 1992 (TULRCA) notification obligations could feel the full force of the law.

While failure to notify the Secretary of State about collective redundancies of over 20 employees has been a criminal offence since TULRCA was introduced, these were the first individual criminal charges to be brought. Employers who do not give the Secretary of State the necessary notice of collective redundancies (20 or more) commit a criminal offence with the penalty of a fine. Directors, managers, secretaries, or other similar officers, can be personally liable where a failure to notify has taken place with their consent, connivance or neglect. Notably, the previously capped fine of £5,000 is now unlimited for offences committed after 12 March 2015.Redundancies

The specific circumstances of these redundancies garnered a lot of press attention at the time they took effect. City Link was placed into administration on 24 December 2014, leaving over 2,500 employees jobless over the festive period. The USC employees (a division of Sports Direct) were allegedly given just 15 minutes’ notice of their proposed redundancies, rather than the 45 days required by TULRCA for redundancies of 100 or more employees. Government prosecutors alleged that the directors became aware that redundancies were inevitable on 22 December 2014, but the Secretary of State wasn’t notified until 26 December 2014. The Magistrates’ Court ruled that there was no “proposal to dismiss” triggering the TULRCA duty, as the directors genuinely believed that there was a real prospect of the business being bought while in administration and of jobs being saved.

Notwithstanding that the outcome was a happy one for the directors, this episode is a reminder that the Government will be ready to prosecute where it suspects serious breaches. This makes the dotting of i’s and crossing of t’s important when it comes to redundancy process. In practice this means the HR1 form for any proposed redundancies of 20 or more employees is submitted to the Secretary of State in time (and updated immediately if circumstances change), and meaningful consultation is undertaken with those affected.

The Government is considering separately how TULRCA rules should apply to employers in an insolvency situation.

Comments published on Employment Talk do not necessarily reflect the views of Allen & Overy.

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