Consultation for redundancy should start when it is clear employee is at risk

The recent Employment Appeal Tribunal case of Coney Island Ltd v Elkouil gives clear guidance on when the process of consultation should begin in individual redundancy situations and how individuals should be compensated.

The consultation process should be started as soon as it is clear to the employer that the employee is to be made redundant. The employee is entitled to be warned that he is at risk of redundancy so that he can begin seeking another job. This means that employers cannot wait to consult until the redundancy is imminent, even if consultation would not have taken more than a couple of weeks and would have made no difference to the outcome.

In this case Mr Elkouil was made redundant but there was no consultation prior to the redundancy. The Employment Tribunal awarded Mr Elkouil compensation of two weeks pay stating “ we consider that even if proper consultation had taken place the applicant would have been made redundant in any event. Had consultation taken place he would have been employed for a further two weeks. This followed the usual approach.

The EAT stated that it was incorrect to limit the award in such a way. The correct approach was to make such compensatory award as the Tribunal considers just and equitable in all circumstances having regard to the loss sustained by the employee in consequence of the dismissal as far as that loss is attributable to action taken by the employer. In this case the consultation period should have started some 10 weeks earlier when the employee’s job had been substantially reduced and it must have been clear to the employer that the employee was going to be made redundant. This disadvantaged him in seeking another job. Therefore the correct compensation was 10 weeks pay.

Employers faced with making redundancies should ensure that consultation (which includes warning the employee of the risk of redundancy) starts timeously. Although there may be good business reasons for not wanting to alert employees of redundancies too soon, employers should be aware that they will be running increased legal risks if they delay consultation.