Recent developments in Collective Redundancy Law

There has been a noticeable increase in recent years in collective redundancies in Ireland, largely driven by cutbacks in the technology sector, but also business closures in areas such as manufacturing and retail. Employers faced with such a scenario must comply with strict legal obligations in relation to information and consultation with employee representatives. 

The Labour Court has recently issued two important decisions regarding information and consultation obligations in respect of the 2020 closure of the Debenhams stores in Ireland. Even more recently, the Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024 has been signed into law. It enhances protection for employees where their employer is insolvent.

In this briefing, we outline what you need to know about these recent developments and what they mean for your business. 

Jane Crowe v Debenhams (Ireland) Limited

Legislative background

The Protection of Employment Acts set out the obligations in respect of providing information to and consulting with employee representatives in a collective redundancy scenario.

Section 9 of the Protection of Employment Acts provides that an employer must initiate consultations with employees’ representatives where it proposes to create collective redundancies. Such consultations must be initiated at the earliest opportunity and in any event at least 30 days before the first notice of dismissal is given. [1]

Section 10 of the Protection of Employment Acts provides that an employer must supply the employees’ representatives with all relevant information relating to the proposed redundancies. Section 10 sets out a non-exhaustive list of information which must be included, and the employer must as soon as possible supply the Minster for Enterprise, Trade and Employment with copies of all information supplied.

The Protection of Employment Acts provide that breach of section 9 or 10 constitutes an offence and that the Workplace Relations Commission (WRC) (or the Labour Court on appeal) may award up to four weeks’ remuneration to an employee in respect of either breach.

What happened in this case?

On 9 April 2020, the board of management of Debenhams in Ireland decided to cease trading in response to confirmation from Debenhams UK that they would no longer be in a position to fund the Irish operation.  Staff were notified of this development on the same date.

Five days later, on 14 April 2020, a letter issued to staff addressing the requirements of section 10 but making no reference to consultation. On 16 April 2020 the High Court appointed joint provisional liquidators. A first consultation meeting took place on 17 April 2020. Further consultation meetings were held and notice of dismissals eventually issued on 20 May 2020.

During May 2020 the trade union wrote to the liquidators requesting information such as copies of legal advice pertaining to leases, stock ownership and the online business. The trade union was of the view that the information provided in response was insufficient. 

A large number of employees, represented by the SIPTU and Mandate trade unions subsequently referred complaints to the WRC claiming that Debenhams had breached its obligations in the manner in which it conducted the information and consultation process, in particular that consultation should have commenced sooner and it had failed to meaningfully consult with employee representatives in what was ‘in reality a tick box exercise’ and that the information which had been provided in response to requests was ‘totally inadequate’ and made it ‘impossible to craft any meaningful proposals to limit the scale of the job losses and/or limit the catastrophic impact on staff’.

It was agreed a “test case” would be heard, in which Ms Crowe was the complainant.  

What did the WRC decide?

The WRC found on the evidence that consultation commenced on 17 April 2020, but that it should have commenced in good time and at an early stage, which was no later than 9 April 2020. It commented that “in good time” meant that there was an imperative to start the process on or about the 9 April 2020 and the delay until the 17 April 2020 was material in narrowing potential options to reduce and mitigate the consequences of the intended collective redundancies. It awarded Ms. Crowe the maximum four weeks’ remuneration.

The WRC concluded that the information requested by the trade union was relevant, that it was not provided and that not having that information frustrated the trade union’s capacity to make constructive proposals. The WRC also awarded four weeks’ remuneration in respect of that breach.

What did the Labour Court decide?

The Labour Court agreed with the WRC that the consultation did not commence in good time and/or at the earliest opportunity. The Labour Court was of the view that the earliest opportunity to commence consultations was 9 April 2020, after the board passed the resolutions that the company would cease trading. It’s worth noting that it also commented that there is no requirement on an employer to have all relevant information available before commencing a consultation process.

While the company did engage in consultation for 30 days prior to the first notice of redundancy issuing, it failed to hold meaningful consultations in good time. The Labour Court upheld the decision of the WRC and its award of compensation in this regard.  

In terms of the alleged breach of section 10, the Labour Court took a different view to the WRC on this point and found that the issues raised by the trade union had in fact been addressed by the liquidator. The Labour Court, taking into account the meetings that occurred during the consultation process and the correspondence exchanged, found that the company had met its obligation under section 10 and the decision of the WRC in this regard was set aside. 

Making clear that the onus is on the employer to supply “all relevant information” (not just the information specifically listed in section 10 of the Act), the Court found that the liquidators had in fact provided the majority of the information requested by employee representatives, bar certain legal advices to which the trade union was unable to satisfy the Labour Court it had any entitlement.  

The case continues…

On 17 May 2024 Debenhams lodged an appeal, on a point of law, in the High Court in respect of the Labour Court’s decision regarding section 9. The outcome of this appeal is eagerly awaited. 

In the meantime the Labour Court’s decision serves as an important reminder that the obligation to inform and consult with employee representatives is not a mere box-ticking exercise.   

The obligation to commence consultations is triggered where a strategic decision or event compelling the contemplation of collective redundancies is made. As the Labour Court’s decision highlights, this includes the making of a decision which raises the potential for collective redundancies in that the decision could (not necessarily will) result in the making of redundancies.

Consultation must commence in good time following this strategic decision or event, even where the employer does not yet have all relevant information available. What constitutes “in good time” is assessed on the facts and in the circumstances of each case – however, the Labour Court has made clear that, the more fragile the entity, the sooner this must be commenced, as the passage of time may limit options which can be explored as part of the consultation process and therefore render the process less meaningful.

The obligation is to provide employee representatives with “all relevant information” – not just the information listed in section 10. This information need not be provided at the outset of the consultation process but rather can be provided during consultation. While not specifically endorsed by the Labour Court, the Adjudication Officer’s guidance as to what may be deemed to constitute “relevant information” (namely information necessary to enable employee representatives to formulate constructive counter proposals) is useful. Where employee representatives can credibly assert the requested information meets this threshold, it therefore may be prudent to consider providing the same during the consultation process to the extent possible – bearing in mind and balancing potentially competing interests and obligations, for example, where this information is commercially sensitive or subject to a non-disclosure agreement.

The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024

On 9 May 2024 the Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024 (the Act) was signed into law. It is subject to commencement orders to bring it into effect, which are expected to be made shortly.

The Act widens the scope of those responsible for conducting information and consultation obligations, to not just employers, but “responsible persons”. A “responsible person” includes a liquidator, provisional liquidator, receiver, or any other person appointed by the court where that person has assumed full responsibility for the management of the business. Where a consultation process has already been commenced by an employer, the responsible person will be required to continue that process.

Just like an employer, a responsible person who fails to initiate consultations under section 9 or fails to comply with section 10 shall be guilty of an offence. In the event of proceedings it will be a defence to show that, having exercised all reasonable professional care and skill, the responsible person had reasonable grounds for believing that the employer had complied with the obligations under sections 9 and 10.

The Act also amends the Protection of Employment Acts to give employees a new ground to bring a complaint in circumstances where the employer, or the responsible person, effected collective redundancies before the expiry of the period of 30 days beginning on the date of the notification to Minister. An employee may be awarded up to four weeks’ remuneration in the event of a breach of this provision, bringing the total compensation that may be awarded for breach of the Protection of Employment Acts to 12 weeks’ remuneration.

It is vital that employers and responsible persons familiarise themselves with their obligations under the Act. Failure to do so could have significant consequences, including fines and compensatory awards to all affected employees.

For further information on this topic please contact Triona Sugrue, Knowledge Consultant, Tara Smyth, Associate, or any member of ALG’s Employment team.

Date published: 24 May 2024