redundancies in the construction sector

With the construction sector being severely affected by the current economic environment, redundancies are once again in the news, with Bovis, Redrow and Persimmon among the latest companies announcing job cuts.

For any employer thinking of cutting jobs, redundancy consultation is essential and regard should be had to a recent case in which an award estimated to be in excess of £2 million was made against an employer for failure to engage with employees about the reasons for redundancies.

The case concerned a decision to close a mine under the North Sea where water leaked into it and production stopped. Comparatively little formal investigation or calculations were made into keeping the mine open to delay or minimise redundancies affecting 158 staff.

Redundancy consultation requires an employer proposing redundancies to consider the ways in which dismissals can be avoided, how the number of employees to be dismissed can be reduced, and whether the consequences of such dismissals can be mitigated. Since the point at which the employer was 'proposing' to dismiss the employees was when it decided to close the mine, the Employment Appeal Tribunal (EAT) held that consultation about ways to avoid redundancies would require the employer to consult about the reason for the closure. The employer had not done this and was therefore found to be in breach of the consultation requirements.

Although the facts of this case limit it to circumstances where a business or site is closing down, the reasoning of the EAT could potentially extend to other redundancy situations. The size of the award in this case was partly due to the employer being held to have misled the union about the reasons for the closure, and was therefore unusually large. However, it highlights the need for all employers to take consultation obligations seriously in a redundancy situation, or risk significant financial consequences, and at a time when they can least afford it.

For further information please contact Richard Wade, head of Blake Lapthorn's Construction and Development group on richard.wade@bllaw.co.uk or call 01865 254244.