In light of recent mass layoffs in the tech industry, William Fry’s Catherine O’Flynn and Elaine Egan explain the legal obligations employers need to fulfil when it comes to collective redundancies.
In recent months, there has been a lot of discussion about collective redundancies following announcements by a number of high-profile technology companies that they were looking to reduce their workforces globally. Unfortunately, many people in Ireland now find themselves at risk of redundancy.
In contrast to the US, where employment is often ‘at will’ (meaning employers can terminate the relationship at their discretion and without notice), employees facing redundancy have significant legal protections in Ireland.
Due to the number of staff impacted in these companies, the proposed reductions in workforces may be liable to trigger a collective redundancy process. Below is a brief overview of the consultation and notification obligations of employers where a decision is taken that falls within the scope of our collective redundancy legislation.
What is a collective redundancy?
Collective redundancies are dealt with in the Protection of Employment Acts 1977-2014. A collective redundancy occurs where a certain number of employees are dismissed by reason of redundancy within a 30-day period.
This minimum number varies depending on the size of the organisation involved. The minimum thresholds under the acts are:
- Five employees where an establishment normally employs 21-49 employees
- 10 employees where an establishment normally employs 50-99 employees
- 10pc of employees where an establishment normally employs 100-299 employees
- 30 employees where an organisation normally employs 300 or more employees
Employers should be cautious when calculating the number of employees ‘normally employed’, as this is the average number of employees over the preceding 12-month period.
Where an employer takes a strategic or commercial decision that compels them to contemplate or plan for collective redundancies, then their obligations under the acts will be triggered.
What are the consultation obligations?
Where an employer is proposing collective redundancies, they are obliged to consult with elected employee representatives, or where no representatives are elected, with the individual impacted employees.
Consultations are to be conducted ‘with a view to reaching agreement’ and should include discussion on the possibility of avoiding the proposed redundancies, reducing the number of impacted staff and the possibility of redeploying staff to other roles.
When does the minister need to be notified?
Where an employer proposes to implement collective redundancies, they are obliged to notify the Minister of Enterprise, Trade and Employment at the earliest possible opportunity and at least 30 days before the first dismissal takes effect.
This notification must include prescribed information, including the number of employees normally employed, the number and categories of employees it is proposed to make redundant, the period during which the proposed redundancies are expected to take effect, and the reasons for the proposed collective redundancies.
What is the ‘30-day period’?
Anyone following media reports on redundancies in technology companies will undoubtedly have heard of a 30-day moratorium on dismissing employees once consultations begin.
The act actually has two separate 30-day periods to consider in the context of collective redundancies. Firstly, the first notice of dismissal cannot be served until at least 30 days after collective consultations begin. Secondly, the first dismissal cannot take effect until at least 30 days after the minister has been notified.
In practice, the 30-day period from the notification to the minister and the 30-day consultation period often run concurrently.
The distinction is particularly important where consultations begin prior to the notification being issued and where an impacted employee is to be paid in lieu of notice, as their notice could be served the same day their dismissal takes effect.
What are the risks if an employer fails to comply?
It is important to remember that an employer going into these consultations cannot have made a concrete decision to terminate a contract or have issued a notice of termination to any employee prior to the conclusion of these consultations.
To do so would firstly be in breach of the acts, but importantly it would undermine the legitimacy of consultations as the result would be a foregone conclusion.
In such circumstances, impacted employees could take an unfair dismissals claim on the basis they were dismissed without a fair process, and could be awarded up to two years’ remuneration.
There are also legislative sanctions to consider. If a dismissal takes effect before the expiry of 30 days from the notification to the minister, the employer could be liable for a fine of €250,000.
If the employer fails to begin collective consultations at least 30 days before the first notice of dismissal is given, the company can be fined €5,000. There are increasing calls to enforce sanctions against companies who do not comply with their obligations.
Another important consideration for employers is the extent of the media coverage surrounding collective redundancies and the potential reputational impact for failure to comply with their obligations.
There are strict procedures that must be followed in a collective redundancy situation and while compliance with the legislative requirements may seem a daunting prospect at first, it is ultimately beneficial to have a clear legislative framework in place that sets out a clear timeframe and steps to be taken to ensure a compliant consultation process.
By Catherine O’Flynn and Elaine Egan
Catherine O’Flynn is the head of employment and benefits department at William Fry. Elaine Egan is an associate in the employment and benefits department at William Fry.
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