OTS Academy – Redundancy and a reminder of the basics
redundancy is a word that’s never far from conversations, particularly when a UK Employment lawyer is on hand, in these uncertain times fuelled by Brexit and the concerns over the economy when the UK leaves the EU – particularly if no deal is agreed between the UK Government at the rest of the EU in the coming weeks. So for a business contemplating its options - and for employees concerned about what the future holds for them, our London employment solicitors have put together a ‘back to basics’ guide to redundancy to ensure that whether you’re the employer wanting to get it right, or the employee concerned that you’ve been treated unlawfully, you will have a better understanding of what’s what.
The meaning of redundancy
‘redundancy’ arises when an employee’s job disappears. It can be one job or a number of jobs – but essentially, the employer requires fewer people doing a particular job in a particular geographic location. This is a fairly simplistic definition, as Employment claim solicitors will be quick to point out, but one that gets to the heart of the question of what redundancy is. The statutory definition of redundancy in the Employment Rights Act 1996 envisages, essentially, 4 different circumstances in which a redundancy can arise:
- The closure of a business in its entirety; or
- The closure of a business in a particular location; or
- A reduced need for employees to carry out a particular type of work; or
- A reduced need for employees to carry out a particular type of work in a particular location.
Of course, any individual situation may involve a combination of factors. Top employment solicitors will recognise that a redundancy situation may involve complex business reorganisations where work is reducing overall in different locations and to different degrees.
The test for redundancy
When deciding whether someone has been dismissed because of redundancy, the correct test is to consider 3 steps.
- Has the employee been dismissed; and
- Has one of the statutory definitions in the Employment Rights Act 1996 been met (i.e. does one of the 4 circumstances identified above arise); and
- Has the employee been dismissed as a result of this?
Providing all 3 stages of the test have been met, the employee has been dismissed for redundancy and will be entitled to a redundancy payment. Whether that dismissal is fair or not is another question which we touch on later in this blog. A point for employers to be aware of and employees to take note of is the situation where an employer says the reason for dismissal is ‘redundancy’ but this is being used to mask another reason for dismissal, such as poor performance. Some employers may seek to use redundancy as a means of removing staff without going through the correct procedures, such as performance or sickness management. A dismissal for this reason could well be for a reason other than redundancy.
An employer’s obligations during redundancy
From the moment an employer identifies a potential redundancy situation, a series of legal obligations are engaged to ensure that the redundancy exercise is carried out as fairly as possible and that employees are consulted before the final decision to dismiss is made. Although the employer may well have a clear idea of what it wants to achieve, it’s important to stress that this should not be a ‘done deal’ before meaningful consultation has been carried out and the appropriate statutory notification is given. Consultation should happen once the employer has a clear idea of what he wishes to achieve, and once redundancies are ‘proposed’. The employer should have already examined the alternatives to redundancy. There is a duty to engage in collective consultation with employee representatives when 20 or more people are to be dismissed for redundancy.
Where the employer has a reduced need for employees carrying out a particular type of work, which involves selecting people for redundancy, one of the critical exercises to carry out is defining the selection process and how this will be carried out. It may well be fair to engage in consultation on the selection process and the ‘unit for redundancy’, as there may be conflicting opinions as to which workers should be included in the selection process – and in the ‘redundancy pool’.
Once the selection process has been carried out individual consultation needs to be carried out – not just to give information that they have been selected but to discuss their situation. The consultation needs to happen before the final notice of redundancy is given so that the employee has a chance to express any views and suggestions about alternatives. These need to be considered both properly and genuinely.
Another key consideration is that of alternative work. Are the employees at risk of redundancy able to carry out other work elsewhere and so be redeployed within the organisation? If there is suitable alternative work available, and employee who refuses it unreasonably will potentially lose their right to a redundancy payment.
redundancy and unfair dismissal
redundancy is one of the potentially fair reasons for a dismissal. An employer that gets its redundancy exercise wrong will not only face claims related to the failure of the redundancy itself – perhaps in connection to consultation or the payment of redundancy pay, but also a claim of unfair dismissal.
In some cases, a redundancy exercise may end up being automatically unfair if the selection of a particular individual is based on his or her Trade Union membership or activities. Otherwise, it is open to an employee to claim that a dismissal for redundancy was unfair if the employer has acted unreasonably at any stage of the redundancy process – or indeed at more than one stage of the process. If an employee has been selected for redundancy and suspects that this is because of a ‘protected characteristic’ under the Equality Act 2010, not only will a claim for unfair dismissal be a possibility, but also a discrimination claim - and with it, the potential for unlimited damages.
Getting redundancy wrong can also leave an employer open to a claim of wrongful dismissal – particularly if the employer fails to give the correct notice to the employee.
redundancy can be a difficult and unsettling time for employer and employee. OTS Solicitors are here to offer practical and intelligent advice and support whether you are an organisation contemplating redundancy or an employee facing an uncertain future in the face of a redundancy exercise. For more information, please call us on 0203 959 9123.