How to Handle Redundancy

It seems as though almost every day in the news there is a new article about employees at risk of redundancy. At Kalra Legal Group, we want to ensure that employees know their redundancy rights and that employers are aware of how to conduct the redundancy procedure correctly.

What is redundancy?

Redundancy is where an employer dismisses an employee or multiple employees in order to reduce their workforce. According to S. 139(1) of the Employment Rights Act 1996, a dismissal could amount to a redundancy where the decision to dismiss is ‘wholly or mainly attributable to’ one of the following three scenarios:
Moving place of business: The employer has ceased or intends to cease to carry on the business in the place where the employee was employed.
Closure of business: The employer has ceased or intends to cease to carry on the business of which the employee was employed.
Job duties disappear/diminish: The requirements of the business for the employee to carry out work of a particular kind or to carry out work of a particular kind in the place where the employee was employed have ceased or diminished or are expected to cease or diminish.
If the reason for redundancy is not in line with one of the three scenario’s above it will be a sham redundancy. This will potentially allow an employee to claim for unfair dismissal.

Correct redundancy procedure

It is important for an employer to conduct a correct redundancy procedure to avoid claims for unfair dismissal by dismissed employees.
With redundancies, the ACAS Code of Conduct does not apply. Instead, guidance on the best procedure for redundancy comes from the case of Polkey v A E Dayton Services Ltd [1987]. It highlights three steps an employer must take correctly to avoid a potential unfair dismissal scenario:

1) Consultation with employees (or their representatives) about the proposed redundancy
In avoiding an unfair dismissal, it is important that employee’s are consulted and given as much warning as possible of the potential redundancy. The consultation requirements vary depending on the amount of redundancies being made.
If 20 or more people are being made redundant, it is a collective redundancy. Guidance on collective redundancies is provided by the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). S. 188(1A)(b) of TULRCA states that if over 20 employees are to be made redundant, the consultation period should last at least 30 days before anyone is made redundant. Furthermore, S. 188(1A)(a) states that if over 100 employees are to be made redundant, the consultation period should last at least 45 days before anyone is made redundant.
In collective redundancy situations, If an employer fails to consult with an employee and dismisses them for redundancy, the employer may be forced to pay a Protective Award. The Protective Award is compensation of up to 90 days pay.
For situations where less than 20 people are to be made redundant there is no legislation stating how the employer should carry out the consultation. However, best practice is consultation with employees as soon as is practicable. Each employee at risk of being made redundant should have an individual meeting with the employer. Depending on the situation, the employer could question whether the employee is willing to volunteer for redundancy, or to work part time or job share.

2) Using fair selection criteria to select employees for redundancy
Employers must use fair and objective criteria when selecting employees for redundancy. The criteria must be applied correctly and consistently, otherwise employees may have potential claims for discrimination. For example LIFO (last in, first out) selection criteria is not used as frequently because it is possible there will be age discrimination against employees who have joined most recently and are likely to be younger. An employer could use a scoring matrix to set out criteria for each employee to be marked against (e.g. out of 5). This would aid the employer in coming to a fair and impartial decision.
The employer must provide an opportunity for the employee to appeal the decision to select them for redundancy.

3) Offering suitable alternative work within the business if appropriate
This requirement depends on the size of the employer’s business. Smaller employer’s are less likely to be able to offer suitable alternative work within the business in comparison to medium and larger businesses.
If the offer of alternative work is significantly different, the employee has no obligation to accept it. The case of Readman v Devon Primary Care Trust [2013] highlights this is a subjective test based on the employee in question. It is worth noting that an employer has the ability to offer suitable alternative work on a trial basis, so an employee can test out the role before choosing whether to accept it.

Employee’s Rights

An employee is entitled to receive a notice period before their employment comes to an end. The minimum notice period is determined by statute depending on how long an employee been employed for. It is at least one week’s notice if you are employed between one month and 2 years, and then one week’s notice for every year you have been employed more than 2 years up to 12 years. Therefore, the maximum statutory notice is 12 weeks. An employee would continue working during this period and continue to be paid as normal.
The employee’s contract may provide a longer notice period. It also may provide for payment in lieu of notice, where the employer can pay instead of an employee seeing out their notice period. This is also something an employer may offer an employee even if it is not explicit in the contract.
If an employee has been employed for a continuous period of 2 years they will be entitled to redundancy pay on redundancy. The factors taken into account in redundancy pay calculations are age, length of service and weekly earnings.
As previously mentioned above, an employee has the right to be consulted, be offered suitable alternative employmentand to appeal a redundancy decision.

If the redundancy is a sham redundancy and/or there are flaws in the redundancy procedure (for example, being selected for a discriminatory reason), an employee may have a claim for unfair dismissal. This will also depend on whether the employee has two years continuous service.

Contact our Employment Lawyers London & Maidenhead

At Kalra Legal Group we deal with redundancy situations from both an employee’s perspective and from an employer’s perspective. For expert legal advice on redundancy issues contact our specialist employment lawyers today.