Redundancy advice for employees and employers
In this post we look at some of the common questions both employees and employers have been asking about redundancies:
When is a dismissal of an employee by reason of redundancy?
A dismissal is taken to be a dismissal by reason of redundancy where it is wholly or mainly attributable to:
- a closure of the employer’s business as a whole (business closure);
- a closure of the particular workplace where the employee was employed (workplace closure); or
- a reduction in the size of the workforce because the requirements of the business for employees to carry out work of a particular kind, or to do so in the place where the employee was employed, have ceased or diminished or are expected to cease or diminish (diminished requirements).
When is collective redundancy consultation necessary?
If an employer is proposing to make 20 or more employees redundant at one establishment within a period of 90 days or less, it must consult on its proposal with appropriate representatives, such as a recognised trade union, or if none, with representatives elected by the affected employees and it must also notify BEIS.
The consultation should begin in good time and within minimum time limits:
- Where the employer is proposing to dismiss 100 or more employees in a 90-day period, consultation must begin at least 45 days before the first dismissal takes effect.
- Where the employer is proposing to dismiss between 20 and 99 employees in a 90-day period, consultation must begin at least 30 days before the first dismissal takes effect.
The maximum sanction for breaching the obligations is a protective award of up to 90 days’ gross actual pay for each affected employee, which can add up to a substantial amount.
Employers must not assume that collective consultation is an adequate substitute for individual consultation with affected employees.
What procedure does an employer need to follow in individual cases?
In dismissing employees for redundancy, employers should act fairly and reasonably in order to avoid claims for unfair dismissal. Employers should do this by:
- following any contractual redundancy procedures, express or implied, that may apply; and
- following a fair procedure enabling the employer to make dismissal decisions that are fair and reasonable in the circumstances. In particular, an employer will normally not act reasonably (and a dismissal will therefore be unfair) if:
- there is no genuine redundancy situation; or
- the employer fails to consult the employee individually about the proposed redundancy; or
- the employee is unfairly selected because the employer fails to identify a fair pool from which to select the redundant employee or fails to choose reasonable selection criteria that can be objectively measured and are not discriminatory; or
- the employer fails to search for and, if it is available, give the employee an opportunity to apply for suitable alternative employment within its organisation.
The obligations with regard to an individual are distinct from the employer’s collective redundancy obligations. Accordingly, if there is a collective redundancy situation, there will still be a need for individual as well as collective consultation and the two processes will often run at the same time, although some aspects of the collective consultation should take place first.
An employee with at least two years’ continuous service is entitled to a statutory redundancy payment in addition to any contractual redundancy payment or other benefits that their employer may provide.
Can an employer make an employee on furlough redundant?
An employee can be made redundant whilst on furlough. An employee’s redundancy rights will not be affected by being on furlough but an employer cannot claim reimbursement of redundancy payments or notice pay under the CRJS. Notice pay will be at the employee’s normal rate of remuneration, not their furlough pay.
Whether an employee would have a potentially successful claim for unfair dismissal if they were made redundant whilst on furlough or if they were made redundant instead of being furloughed would depend on the usual test of reasonableness, depending on the particular circumstances of the case, including the size and resources of the employer. Many workplaces have closed and jobs genuinely ceased to exist in this coronavirus pandemic. The fact that there may be a possibility that an employer may need employees in similar roles sometime in the future does not mean that an employer must continue to furlough employees. However, employers would be advised to consider furloughing as an alternative to redundancy and record in writing their reasons why furloughing or continuing to furlough would not be suitable in the particular circumstances of the case.
Redundancy or reorganisation exercise?
Where the employer carries out a reorganisation so that old roles disappear and are replaced by new roles, the question of whether this reorganisation is in fact a redundancy exercise is fact sensitive. As it was put by Burton P in Kingwell and others v Elizabeth Bradley Designs Ltd EAT/0661/02 “It is not an automatic consequence of there being a business reorganisation that there is a redundancy; nor is there a need for a business reorganisation in order that there should be a redundancy situation. The two are entirely self-standing concepts. But if a business reorganisation leads to a diminution in the requirement for employees carrying out the relevant work, then that business reorganisation leads to a redundancy situation and if not, not.” Given that these decisions are fact sensitive, they can be difficult to reconcile and can often cause uncertainty for employers.
If there is a reorganisation so that an old role disappears and is replaced by a new role, and the employee applies for the new role, the employer does not need to use objective criteria to assess the employee’s ability to perform in the new role, and can rely on their usual interview process to make a subjective assessment of who is the best person for the job as long as a fair process is followed and there is no indication of bias.
Can an employee still be made redundant if she is pregnant or on maternity leave?
Selection for redundancy due to pregnancy or maternity is automatically unfair and no minimum period of employment is required for an employee to make a claim. This is also likely to amount to sex discrimination.
That said, where a woman is made redundant while pregnant or on maternity leave, but not due to the fact that she is pregnant or on maternity leave, the normal test of fairness will apply.
A woman who is made redundant while on maternity leave must be offered a suitable available vacancy with her employer or an associated employer, however inconvenient for the employer.
The second reading of the Pregnancy and Maternity (Redundancy Protection) Bill 2019-21 is scheduled to take place on 12 March 2021. This Bill aims to simplify current redundancy protections for pregnant women and women on maternity leave by making it automatically unfair for an employer to dismiss a woman by reason of redundancy if the dismissal occurs during pregnancy or maternity leave or the six month period after the end of the pregnancy or maternity leave, unless the employer’s business is closing down in the place where the woman worked or the work she is employed to do is ceasing and she has not been offered suitable alternative employment. Similar protections would also be available for women who experience a stillbirth or miscarriage.
If you would like to discuss any of the above issues, please contact Susan Bernstein, Employment Partner on 020 8349 5480 or by email.
