Protective Awards are a type of compensation awarded by an Employment Tribunal where it finds that an employer failed to carry out the required consultation process before making redundancies. It only applies where 20 or more employees have been dismissed from the same premises within a 90-day period.
Employment Tribunals can award successful employees up to 90 days’ full pay.
In order to comply with the law, a strict procedure must be followed whereby the employer allows all affected employees to elect representatives. A series of consultation meetings must then take place to discuss ways of reducing or avoiding the redundancies. Alternatively, where there is a recognised trade union, consultation must take place with that union.
Protective awards are intended to be a punitive measure in order to deter employers who would otherwise make sudden mass redundancies. The intention is not merely to afford employee representatives the opportunity to suggest ways that redundancies might be mitigated or avoided, but also to enable employees sufficient time to explore alternative job opportunities. However, despite the Coronavirus Job Retention Scheme, the pandemic has resulted in numerous redundancies, many in breach of the legislation.
Why do so many companies fall foul of the law?
When a company goes into liquidation or administration at the time of the dismissals, the employees can claim redundancy payments, including payments for a successful protective award claim, from the government Insolvency Service. Where employers know the taxpayer will pick up the bill, it makes sense to many to keep employees in the dark about looming redundancies. A buyer might be found or emergency funding secured at the last minute, but if the best employees flee the sinking ship, the business becomes less attractive to any potential buyer and probably less creditworthy to any would-be lender.
Moreover, when dismissals become inevitable, prolonging employment to carry out collective consultation for at least 30 days (and 45 days where 100 or more dismissals are proposed) is costly, but also tempting to avoid when the National Insurance Fund will cover the collateral damage anyway. This disincentive is further enhanced when the company is handed over to liquidators or administrators who have to act in the interest of the creditors as a whole. This has the unintended consequence of pitting the interests of employees remaining employed during the required consultation period against the interests of other creditors who stand to lose money if residual company assets are assigned to wage payments.
Obviously, the law is not intended to enable companies to ignore their obligations in this area with impunity. While it arguably falls short in insolvency situations, early indications are that the pandemic will not automatically constitute “special circumstances” – a statutory defence where a company can escape liability altogether by arguing that it was not “reasonably practicable” to comply with the duty to inform and consult. Although there is no case law yet on this specific point, it is the prevailing view among barristers who specialise in this area.
As Scotland’s leading employment lawyers, we have extensive experience in dealing with Protective Award claims. Unlike other law firms, our solicitors are only ever on the side of employees. We never represent employers. We are currently pursuing claims against Debenhams, Arcadia Group and Top Shop on behalf of hundreds of former employees.
If you think you could be entitled to a protective award, please call our team on 0800 0891 331.
Blog by Paul Kissen, Employment Solicitor
