Redundancy - Getting it Right

by Kate Russell

What is redundancy?

A redundancy occurs where a dismissal is wholly or mainly because you have ceased to carry out your business or intend to cease to carry out your business

  • Either for the purposes for which the employee is employed
  • Or in the place where the employee was employed.
Key point

Many employers don’t realise that redundancy is a dismissal, but it is. You need to follow a fair procedure. This includes an appeal in the dismissal process.

Alternatively, a redundancy occurs where the requirements of your business for employees to carry out work of a particular kind have ceased or diminished or are expected to do so, or the requirements in that place have ceased or diminished or are expected to do so. A redundancy situation will not necessarily arise where there is only a reduction in an employer’s need for particular work to be carried out, rather than a reduction in the number of employees required to do that work.

Example

Miss Welch was employed by Taxi Owners Association (Grangemouth) Ltd as a radio controller, working 36 hours per week on night shifts. There were seven other radio controllers, including one who also worked nights. In early 2011, because of a downturn in business caused by a new competitor, the company tried to save costs by reducing the number of hours worked by its radio controllers.

The Company initially proposed reducing Miss Welch’s hours to 14 per week but, after discussions, amended its proposal to her working 28 hours per week for six weeks, with a commitment to reviewing the situation after that. Miss Welch wanted to be made redundant, and rejected the company’s proposal. She resigned on 2nd April 2011, for the reason that the company was seeking to impose a variation to her contractual hours to which she did not consent, and complained that she had been constructively dismissed.

On appeal, the EAT agreed with the tribunal that there was no redundancy situation the key issue in the case had ‘nothing to do with redundancy’ but, given Miss Welch’s arguments, it dealt with the relevant law. It cited Safeway Stores plc v Burrell [1997] as authority that the relevant issue in determining a redundancy situation is whether or not there is a diminution or cessation in the employer’s requirement for employees to carry out the work in question, rather than merely a diminution in the work itself. The court also said it found it ‘very difficult’ to accept that an employer can, in principle, be in fundamental breach of contract by not dismissing an employee (whether for redundancy or some other reason). Ms Welch’s appeal was dismissed.

You also need to do what you can to remove or reduce the need for redundancy, including looking for alternative work opportunities in the organisation. Redundancy can be unfair if you don’t provide enough information on other jobs.

The employer must take reasonable steps to find alternative employment, within the organisation or with an associated employer, for any employee selected for redundancy. It should fully explore all alternatives with employees as part of the consultation process and confirm the details of available work in writing. These details should confirm the job title, duties and terms and conditions that attach to the alternative role, so as to enable the employee to take a decision on a fully informed basis.

Example

Mr Fisher was a New Business Manager employed by Hoopoe. When it ceased trading, he faced redundancy. There was a sales account manager vacancy within Hoopoe’s new organisation, but no further details were provided as Mr Fisher had expressed no interest in that role.

A few weeks after his dismissal for redundancy, the role was advertised. The financial package was comparable to Mr Fisher’s previous position. He claimed unfair dismissal. A key element of his claim was that Hoopoe’s failure to provide him with any financial information about the new role meant he was denied the opportunity to give the role any realistic consideration.

The EAT rejected Hoopoe’s argument that its only obligation in law was to enquire about job opportunities within the business, and to make any such vacancies known to an employee. Providing such detail as the financial prospects of a particular role should be the norm unless it was not practicable because, for example, the financial prospects had not yet been determined.

However, Mr Fisher’s own conduct and lack of interest in the new role indicated that failure by an employee to express an interest in a position or to request further information (including financial information) is a factor that the tribunal may wish to take into account in reducing an award on the grounds of contributory fault.

Employees who are made redundant during a period of maternity, adoption leave or shared paternity leave, have special rights. In these cases, you must offer the employee any suitable alternative vacancy that exists, either within the organisation or with an associated employer. If there is such a vacancy, the employee is entitled to be offered that new job on contractual terms that are not substantially less favourable than those enjoyed under the previous contract. An employer’s failure to offer a suitable available vacancy that exists on no less favourable terms will make the dismissal automatically unfair. This right does not apply to ordinary parental leave or paternity leave.

However, what is a suitable vacancy is a question for the employer to determine, having due regard for the employee’s circumstances.

Example:  the EAT has confirmed

Ms Simpson worked for EIS as an insurance consultant at one of its London branches. During her period of maternity leave the company shut several branches including the one where she worked. It relocated its business to various call centres round the UK. As part of its redundancy consultation process, EIS sent details of various alternative vacancies to Ms Simpson, including one at the new Cheltenham call centre, and invited her to apply for them if she was interested. Ms Simpson did not apply for any vacancies. She was later made redundant. She complained that the dismissal was automatically unfair, arguing that the company should have offered her one of the alternative positions, rather than simply sending information and inviting her to apply.

EIS took the view that it was not required to offer the Cheltenham position to Ms Simpson. It agreed that the role was suitable and appropriate in the circumstances, but its terms and conditions were substantially less favourable to her, as Ms Simpson would have had to both relocate and change her work pattern from weekdays only to working a seven-day shift.

The EAT agreed. It found that in order to be a suitable alternative vacancy, the vacancy had to be both suitable and appropriate in the circumstances and its terms and conditions must not be substantially less favourable. Therefore the company had not been obliged to offer the Cheltenham role to Ms Simpson.