Information and consultation requirements

Under section 30 of the Act, an employer is permitted to terminate the employment of an employee whose position is redundant. Section 30(3) sets out the various conditions which, if they directly result in a reduction in the employer’s work force, will amount to a “redundancy” for these purposes (for example, the discontinuance of all or part of the employer’s business). Notice must be given in accordance with the employee’s contract and the statutory minimum notice requirements under section 20, and the employee will be entitled to a severance allowance.

From 1 June 2021, section 30 will be amended to require an employer to provide the following information to an employee before making them redundant:

  • “the existence of the relevant condition of redundancy”;
  • “the reasons for the termination contemplated”;
  • “the number and categories of employees likely to be affected”; and
  • “the period over which such termination is likely to be carried out”,

(the “Statutory Information”).

In summary, the employer should as a minimum identify the circumstances which meet the definition of “redundancy” under section 30(3), explain why these circumstances have led to the proposal to reduce headcount, and provide details of the employees affected by the proposal and the date(s) on which the terminations are expected to take effect, if confirmed.

From 1 June 2021, the employer will also be required to “consult” with employees on the following matters:

  • “the possible measures that could be taken to avert or minimise the adverse effects of such redundancy on employment”; and
  • “the possible measures that could be taken to mitigate the adverse effects of any termination on the employees concerned”,

(the “Consultation Matters”).

Topics to be covered should include alternatives to making compulsory redundancies, such as a reduction in hours or job-sharing, as well as the availability of any suitable alternative vacancies in the employer’s organisation that the employee could be offered.

At present, employers are only required to inform and consult with the employee’s trade union or other representative, if they have one (although, as good practice, many employers will already go through at least an informal consultation process with an employee before making them redundant). Further, the law currently provides that employers must take these steps “as soon as practicable”, but from 1 June 2021 the information and consultation requirements must be carried out “not less than 14 days” before giving notice of termination.

This is the first time that employers will be under a legal obligation to inform and consult directly with employees on redundancies. Failure to follow the new requirements could have serious consequences: the employee’s termination could be unlawful, meaning that they may be able to bring a claim for reinstatement or re-engagement, or compensation for unfair dismissal.

Redundancy process

To ensure compliance with the new statutory obligations and with best practice, we suggest that employers follow a redundancy process which includes at least the following steps:

  • An initial meeting at which the affected employee(s) are informed that they are ‘at risk’ of redundancy. The Statutory Information can be given at this meeting and/or confirmed in writing thereafter;
  • A fair redundancy selection process should then be conducted, if required;
  • Employees identified for redundancy should then be invited to a formal consultation meeting, during which the Consultation Matters should be discussed. Further consultation meetings may be necessary if issues arise at the first meeting which require further investigation or consideration.

Once the consultation process has concluded, and assuming no alternative to redundancy has been identified, the employer can proceed to give notice of termination. Each of the steps above will need to be taken at least 14 days before notice is given.

Lay offs

Under section 32 of the Act, where any of the conditions of redundancy exist an employer may lay off an employee for a continuous period not exceeding four months.

Currently, there are no specific information or consultation requirements that employers must comply with in order to implement lay offs. From 1 June 2021, employers will be subject to a new obligation to provide the following information to the employee, and their trade union or other representative (if any), as soon as practicable:

  • “the existence of the relevant condition of redundancy”;
  • “the reasons for the lay off contemplated”; and
  • “the period over which such lay off is likely to be carried out”.

The origins of this new requirement can likely be traced to the increased focus on the lay off provisions in the Act during 2020, when the impact of the covid-19 pandemic resulted in a significant number of lay offs. This new requirement will increase protection and transparency for employees who are laid off in future.

Summary

The new requirements discussed in this article will involve a significant change to many employers’ current HR practices and will substantially increase legal protections for employees, and risks for employers, in the context of workforce reductions.

Anyone with any questions concerning how these amendments may impact their business can contact a member of our Employment and Immigration Practice: Bradley Houlston ([email protected]) or Jordan Knight ([email protected]).

Type

Insight

Locations

Bermuda

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