Protective Awards
If an employer fails to comply with its collective consultation obligations under TULCRA (further information on collective consultation obligations can be found here) an Employment Tribunal may make a protective award. A protective award requires an employer to pay a specified sum to its employees of up to 90 days’ gross pay per employee. There is no cap on an employee’s pay for these purposes.
It will be for a Tribunal to decide how much any protective award should be. As a general rule of thumb where no consultation whatsoever has taken place, a Tribunal’s starting point will be the full 90 days’ pay. The Tribunal will then consider whether this amount should be reduced to reflect any mitigating circumstances for example, third party pressures or where representatives were unwilling to participate. The greater the extent to which the employer has attempted to comply with TULCRA the lower a protective award is likely to be.
Nevertheless, given the absence of a cap on pay combined and the number of employees potentially involved, employers would be well advised to take all steps to avoid the risk of a protective award being made.
Protective Awards: A Guide for Employers
Protective awards are a form of financial compensation awarded by employment tribunals to employees when an employer fails to comply with the legal requirements for collective consultation during redundancies. In the UK, employers are legally obligated to engage in a consultation process with employees or their representatives when proposing to make 20 or more redundancies within a 90-day period at a single establishment. If an employer fails to do so adequately, affected employees may be entitled to a protective award, which serves as a penalty for the employer and compensation for the employees.
Understanding the Purpose and Scope
The purpose of protective awards is to enforce compliance with the consultation requirements outlined in the Trade Union and Labour Relations (Consolidation) Act 1992. This legislation aims to ensure that employees are given a fair opportunity to understand the reasons for redundancies, contribute to the consultation process, and explore alternatives that might reduce the need for job losses. Protective awards can be granted to all employees affected by the employer’s failure to consult, including those not directly made redundant if the lack of consultation deprived them of the chance to influence the process.
Calculating Protective Awards
The amount of a protective award is determined by the tribunal and can be up to 90 days’ gross pay per affected employee. This calculation is based on the severity of the employer’s failure to consult and the duration of the non-compliance. For instance, if an employer completely disregards the consultation process, the tribunal may award the maximum amount. However, if some effort was made to consult, albeit insufficiently, the tribunal may award a lesser amount. It is important to note that protective awards are separate from redundancy payments and can significantly increase the financial liability of an employer.
Minimising Risks and Ensuring Compliance
To avoid the risk of protective awards, employers must ensure they fully comply with collective consultation requirements. This includes starting the consultation process early, providing comprehensive information to employee representatives, and engaging in genuine dialogue to explore alternatives to redundancies. Employers should also document the consultation process meticulously, keeping detailed records of meetings, communications, and any steps taken to mitigate redundancies. Involving legal professionals or employment experts can help navigate the complexities of the law and ensure that all obligations are met.
In conclusion, protective awards underscore the importance of adhering to legal consultation requirements during redundancy processes. Employers should view these obligations not only as a legal necessity but also as an opportunity to manage workforce changes transparently and ethically. By doing so, they can maintain employee trust, minimise disruption, and reduce the risk of costly penalties.
