Notifying the Secretary of State of redundancies: avoiding criminal liability

The Department for Business, Innovation and Skills (BIS) is taking an unprecedented hard stance, although the sanction was brought in over 20 years ago. With this in mind we look at your obligations and how you can avoid risks of criminal prosecution.

Background

A spokesperson from BIS has confirmed that criminal proceedings have been commenced against three directors of parcel firm, City Link, after administrators were called into the business last Christmas Eve, leading to over 2,500 redundancies.

The directors are being accused of failing to notify the Secretary of State of proposed redundancies contrary to their obligations under s.193 of the Trade Union and Labour Relations (Consolidation) Act 1992. Section 194 of the Act dictates that these failings are a criminal offence liable on conviction to a fine not exceeding £5,000 (now unlimited for offences committed after 12 March 2015). The directors can be made personally liable where the offence is committed with their consent or connivance, or attributable to their neglect.

It is understood that the former directors will face trial in Coventry Magistrates Court on 5 and 6 November 2015.

The Chief Executive of Sports Direct, Dave Forsey, has also been held to account after 200 employees in Scotland were given 15 minutes’ notice that they were losing their jobs in January.

Your legal obligations

Where you propose to make redundant more than 20 employees at one establishment within a 90-day period then an obligation arises to notify the Secretary of State for BIS of the proposals.

Notification should be completed using form HR1. The notification should state the identity of any employee representatives to be consulted (and copied to them) and the date on which the consultation began as well as other information specified in the form.

If you are proposing 20-99 redundancies, notification must be received by the Secretary of State at least 30 days before the first dismissal takes effect.

If you are proposing 100 or more redundancies then notification must be received by the Secretary of State at least 45 days before the first dismissal takes effect.

Who could be liable?

Generally the company would be guilty of any offence and be liable to pay the fine. However, in certain circumstances the people behind the company can become criminally responsible for the failure to notify. This can include any director, manager, secretary or other similar officer of the employer, or any person purporting to act in any such capacity.

BIS are entitled to look beyond the company where the offence has been committed with the consent or connivance of, or to be attributable to, neglect on the part of any of the persons listed above.

Changes made to the law in March 2015 mean that the fine, which was previously capped at £5,000, is now unlimited for any offences committed after 12 March 2015.

What does this mean for me?

BIS have failed to comment on their new approach to criminal prosecution and whether directors will continue to be held to account for their failings. The examples of prosecution seen so far have been extreme and can be understood against the background of the Government being obliged to pay out millions of pounds in similar circumstances.

Now that fines have become unlimited, the threat of prosecution is an even more daunting prospect for companies and indeed the people behind them.

If you have a redundancy situation then professional advice should be obtained at an early stage to avoid the risk of criminal prosecution.

How can I find out more?

For more information on your legal obligations in a redundancy situation, please contact one of the employment team.