Potential BHS Job Losses Create Redundancy Questions for Employees


The Law Of... being made redundant

Following the liquidation announcement by the administrators of high street brand BHS, Joy Drummond – Partner and employment law specialist based in Simpson Millar's London office – considers the issues now facing the 11,000 employees who could be facing redundancy from the company.

Potential BHS Job Losses Create Redundancy Questions for Employees

Redundancies of BHS Staff

The demise of BHS has not happened overnight and, while an inquiry takes place to try and establish causation for the brand's collapse, it is the 11,000 BHS staff and 20,000 pension holders that are undoubtedly the ultimate losers from this messy scenario.

As Joy comments:

"With a big case such as BHS the personal effect can be lost, but each of the employees who are facing redundancy will have their own individual situation and will need legal advice tailored to their needs. Acting collectively can be vital in getting the best deal possible for each employee and in this scenario the role of the union, USDAW, is key. Employees are advised to contact the union in the first instance."

Legal Advice for Redundancies

It is not yet known if all of BHS' stores will close, or if some stores and jobs will be saved by a buyer. Even in the case of a buyer saving certain stores, questions may arise on the terms offered to staff that are retained by the business.

In cases of redundancy the first step is consultation, in which employers are obliged to consult with each employee individually about the situation and the options open to them.

Employers also have to consider the requirements for collective consultation.

The consultation period varies depending on the amount of staff being made redundant; however Joy explains how the BHS could try to use a legal loophole to avoid a large number of collective redundancies.

"Where an employer is proposing to dismiss as redundant 20 or more employees at one 'establishment' they also have to consult collectively ‘in good time’ and at least 30 days before the first dismissal (45 days in the case of the dismissal of 100 or more employees)."

"Unfortunately under the current law 'establishment' means the unit to where the workers being made redundant work, which is likely to mean that each store will be counted separately for this purpose, even if the individual store does not have the management level of decision making to decide whether or not to make the redundancies."

Regardless of the technical legal the administrators should consult with USDAW to try to achieve the best possible end result for the employees.

Employees with at least two years of service are entitled to a statutory redundancy payment.

Unfair Dismissal Claims and Claims for a Protective Award

If BHS fail to comply with their legal obligation to arrange consultation with staff then employees may be able to bring unfair dismissal claims against the employer, while if a collective consultation does not take place a protective award claim could be filed.

Joy explains how successful unfair dismissal awards could be paid in the case of an insolvent company:

"If either an unfair dismissal or protective award claim is successful, but the employer cannot pay because they are insolvent, then the employee can claim from the National Insurance Fund. In the case of unfair dismissal, a basic unfair dismissal award or a statutory redundancy payment (they are calculated in the same way) could be awarded from the fund."

"The National Insurance Fund may be relevant to BHS employees facing redundancy in other regards, as this scheme can pay other debts in cases of insolvent employers, including pay up to eight weeks, notice pay for statutory notice and holiday pay up to six weeks."

In the case of a statutory redundancy payment the fund could be of assistance even if the employer is not insolvent, provided the employer is refusing to pay the statutory redundancy payment that the employee is entitled to.

New Owners, New Terms and the Pension Blackhole

For the employees that could face redundancy in the event of liquidation will be hoping that a new buyer may save some stores and keep staff employed. However even this scenario may result in employees seeking legal advice, as Joy outlines:

"If there is a buyer for any of the stores they may continue to employ the staff, however they may expect the staff to agree to a variation of their pay, alongside other terms of their employment. If these variations are not accepted employees may have claims for unfair constructive dismissal, unlawful deduction of wages, or breach of contract."

"Other possibilities that may arise in the case of a new buyer for certain stores include breaches of the obligation to pay the National Minimum Wage and failure to comply with the Transfer of Undertakings Regulations."

As well as the factors relating to employee redundancies, there is also the question of accrued pension rights of current and former employees and pensioners to consider. It is thought that the pensions of 20,000 current and former employees are in a precarious situation, as BHS' pension deficit sits at £571m. Although the government Pension Protection Fund is likely to assist, the pensions paid through the Fund are likely to be at a lower level than staff would have expected.

Getting Help

If you have been affected by the developments at BHS, you should contact your union if you are a member. If this avenue is not open to you and you need guidance on your employment rights, our team of employment law specialists are on hand to provide support and guidance on the redundancy process.

At Simpson Millar, we have teams of experts across the UK – with bases in Leeds, London, Birmingham, Newcastle, Manchester, Cardiff, and Bristol – who will be happy to take your call and provide tailored advice specific to your case.

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