Redundancy law changes ‘a challenge’ for UK construction firms, MPs told

Alasdair Reisner, Chief Executive of the Civil Engineering Contractors Association has been telling MPs why the construction industry has problems with some of the employment reforms proposed in the Employment Rights Bill currently making its way through parliament. In particular he has concerns over changes to redundancy laws and trade union rights. His views broadly mirror what our clients have been telling us. 

Reisner’s was speaking at a parliamentary session focused on evaluating the implications of the Labour Government’s Employment Rights Bill on various sectors, including construction – he is on screen there giving his evidence. The Bill proposes significant reforms to employment laws, such as making unfair dismissal protections a day-one right, changes to zero hours contract and modifying redundancy consultation requirements. Reisner was invited to provide industry insights on how these changes might impact construction businesses. 

Construction News reports on this with their headline ‘Redundancy law changes difficult to enforce in construction, MPs told’ and highlights the key points raised by Reisner.
 
He said the construction sector faced inherent difficulties in applying the proposed redundancy laws given its unique operational dynamics. He explained how the transient nature of construction projects and the industry’s reliance on subcontractors and fluctuating labour demands, complicates the implementation of standardised redundancy procedures.

He told MPs he was also concerned that the new redundancy laws would impose significant additional administrative burdens, and therefore costs, on construction firms. He warned that without tailored provisions, the legislation might lead to increased operational costs and legal complexities, potentially affecting the sector’s productivity and employment rates.

When pressed on the specifics, Raisner said he was concerned about the removal of the ‘single establishment’ rule. He explained that construction firms, with their transient, project-based workforce, would face heightened administrative challenges under this change, as redundancies across multiple sites would, after the changes, count toward collective consultation thresholds. He said it would create a near-constant need for consultation processes, even for routine workforce adjustments, disrupting operations. 

So how might the removal of the single establishment rule impact the construction industry? It’s a point we covered last month in our Spotlight programme looking at the impact of the Bill on the construction sector. Stuart Neilson explained the point:
 
Stuart Neilson: “I think, again, this is pretty challenging change. Some of the listeners might remember back, I think it's probably 10 years ago, there was a case called Woolworths which at that point in time I think the Court of Appeal suggested that the establishment rule had to go and therefore when you had redundancies you had to count up all the redundancies across the entire organization in the UK and that created problems for about a year and then the decision got overturned in the Supreme Court and we were back to the establishment rule, so looking at redundancies within an establishment. So what the government are now proposing is effectively to go back to that world when we had the Woolworths Court of Appeal decision so you would actually have to count up the number of redundancies across the whole entire business to determine whether or not you hit the threshold. Now for large employers what that effectively means is that you are constantly in a situation where you probably are at, or above, that threshold because of the quite wide way in which redundancy is interpreted for these purposes. It's not just your classic redundancy situation, it can cover any type of situation where an individual leaves, other than for performance or misconduct. You get into a situation where you really have to proceed with collective consultation for almost all departures in those circumstances. So it is going to make it much more challenging and when you are looking at departures other than, as I say, misconduct, performance related ones, you are probably going to have to go through some form of collective consultation if the law changes on as the government are proposing.”

As well as the redundancy changes the other big concern which Reisner flagged with MPs is the proposed trade union reforms, in particular the increased union access and reduced thresholds for recognition. He said the construction sector has historically maintained low union density, preferring more direct engagement with employees through forums or consultative groups. He warned the changed could lead to more widespread unionization, introducing complexities to employer-employee relationships and creating additional compliance burdens. We agree. Stuart Neilson again: 

Stuart Neilson: “I think the concern for employers is that historically the number of employers in the infrastructure sector that recognize trade unions has been reasonably low and probably getting lower over the years. The public sector tends to be the area where trade unions have been stronger, certainly than necessarily in the infrastructure sector, but I do think the infrastructure sector is the sector that unions will be looking to try and get a little bit more representation and recognition from employers. Now obviously there can be positives to that, but there can also be negatives to that and I think for a lot of employers, sometimes they prefer to work with their own employees within a kind of employee forum, or employee consultative group, and with the unions being given greater powers to come in and force recognition that may force employers down the route of having to deal with trade unions in a way that they don't currently have to. The key changes that we're talking about here are, firstly, this legislation is going to give them trade unions greater access right into the workplace. So at the moment, unions don't really have the right to just come in and start talking to employees. This legislation is going to give them, effectively, that right. Secondly, at the moment, if you want to get recognition as a trade union you have to show you've got at least 10% of the bargaining unit which are members of that trade union. The government is proposing to reduce that number down from 10% although, again, we don't know what it will be but I have seen reference to it being as low as 2% which is obviously a very low number. Also, the voting requirements around getting recognition are going to change to make it easier to get recognition. So what you could end up with is recognition in situations where there's really quite small density of trade union membership within a particular bargaining unit, and I think that might represent some challenges for employers within the infrastructure sector.”

In that interview Stuart Neilson also explained the impact of a number of other changes being introduced by the Employment Rights Bill including day-one unfair dismissal rights, limits on fire and rehire, replacement of zero hours contracts with guaranteed hours and changes to flexible working. That programme is called  ‘Spotlight on construction sector as challenges unveiled by ER Bill’ and is available for viewing now from the Out-Law website. We’ve included a link to it in the transcript of this programme for you.

- Link to HRNews programme: ‘Spotlight on construction sector as challenges unveiled by ER Bill’