Made.com has now gone into administration and is being sued by former employees after being made redundant via Zoom. It is another name in a string of companies which has failed to follow correct procedures when making employees redundant.
Following its collapse, the online furniture retailer was bought by Next – but its staff weren’t included in the deal, and subsequently 320 jobs have been cut. A number of those employees are now pursuing legal action as a result, claiming that Made.com failed to fulfil its duties as an employer.
The problem is, Made.com didn’t act in accordance with protocol when it issued the redundancies. Legally speaking, if a company is proposing to make 20 or more redundancies, special collective consultation rules apply, which includes consultation with trade union representatives prior to a decision being made. Consultation must start “in good time” to allow the relevant discussions to take place and a minimum period (either 30 or 45 days) before the first of the dismissals takes effect. Consultation must also take place “with a view to reaching agreement” and should commence prior to the decision being taken on making redundancies, otherwise a tribunal will likely find the company failed to follow procedure.
There is a limited exception to the duty to consult if there are “special circumstances” that make consultation not reasonably practicable. This exception is narrowly interpreted and rarely applies. Most of the cases involve insolvency and, even then, not every insolvency situation will make consultation impracticable.
Companies should ensure these consultation processes take place prior to making redundancies in order to avoid future claims, even if the company is on rocky ground. While actions are limited when a company has gone into administration, employees (even those with less than 2 years’ service) can make an application to the employment tribunal for a “protective award”. The tribunal is at liberty to award a payment of up to 90 days’ gross salary (capped at £571 per week) for failing to follow a consultation process. If there has been no consultation at all, the tribunal will start with the maximum 90-day protective award and reduce it only if there are mitigating circumstances.
Given the current climate and cost of living, employees might be less inclined to seek legal advice given the expense against the potential award. However, in any event, when making the decision not to consult, companies should be prepared for long-winded tribunal cases and legal costs. With an imminent recession looking likely, more and more companies will need to make redundancies. If so, it is imperative that everyone is aware of and follows the rules, to avoid having to pay for costly litigation when the company is already struggling.