Redundancy

Redundancy is a form of dismissal that occurs when an employer needs to reduce their workforce.

Whilst redundancy is a potentially fair reason for dismissal under the Employment Rights Act 1996, the complex rules mean that employers are required to comply with strict legal procedures to ensure fairness and compliance. If an employee can establish that there was no genuine redundancy situation, that there were errors in the redundancy process, or that there was a discriminatory or unfair selection process, they may be able to bring a claim for compensation in the Employment Tribunal.

The Redundancy Situation

For a redundancy dismissal to be fair, there must first be a genuine redundancy situation.

The statutory definition of redundancy is found in section 139 of the Employment Rights Act 1996 which states that:

“an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:

(a) the fact that his employer has ceased or intends to cease:
(i) to carry on the business for the purposes of which the employee was employed by him, or
(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business:
(i) for employees to carry out work of a particular kind, or
(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer, have ceased or diminished or are expected to cease or diminish”

A redundancy situation will therefore arise if all or part of an organisation is closing, changing the types or number of roles needed to do certain work, or changing location.

The Redundancy Process

In addition to the need for there to be a genuine redundancy situation, an employer must ensure that they follow a fair and transparent process which avoids the selection of employees for discriminatory or unfair reasons.

A fair redundancy procedure will typically include:

• Genuine consideration of alternatives to redundancies, including suitable alternative employment within the organisation.
• Determination of the pool of employees at risk of redundancy.
• Effective consultation with affected employees (and with employee representatives or trade unions if there will be 20 or more employees at risk of redundancy with a 90-day period), including notification and explanation of the situation, meetings and considering feedback from employees or representatives.
• Adoption and use of fair, objective and non-discriminatory criteria to select employees for redundancy.
• Written notice of redundancy and confirmation of applicable statutory rights such as notice pay and statutory redundancy pay.
• Giving employees the right to appeal their redundancy dismissal.
• Giving employees with at least two years of continuous services reasonable time off to seek new employment or arrange training.
• Where an employee agrees to an alternative role as an alternative to redundancy, offering them a 4-week trial period in the alternative role without losing their right to redundancy pay.

Common pitfalls for employers in a redundancy process include:

• Unfair selection using discriminatory or subjective criteria, for example selecting employees for redundancy based on age, gender or pregnancy.
• Inadequate consultation, for example failing to consult employees properly or not considering alternatives to redundancy.
• Procedural errors leading to breach of contract claims, for example failing to provide adequate notice or redundancy pay.
• Failing to document all stages of the redundancy process.

Due to the technicalities involved in achieving a fair redundancy dismissal, many employers use settlement agreements as an alternative to running and redundancy process. This is a legally binding agreement where the employee agrees not to pursue a claim against the employer in return for an agreed payment.

What is collective consultation?

Collective consultation is where an employer must consult on redundancy proposals with a recognised trade union or, if there is not one, with employee representatives. Collective consultation is required where an employer is proposing 20 or more redundancies in one establishment within a 90-day period. This is in addition to the requirement to consult with employees individually. Failing to meet these requirements will enable an employee to apply to the Employment Tribunal for compensation of up to 90 days full pay.

By law, employers must inform the government’s Redundancy Payments Service about planned collective redundancies. This should be done 30 days before the first dismissal if there are between 20 and 99 redundancies and 45 days before the first dismissal if there are 100 or more redundancies. Fines are issued for non-compliance.

What types of redundancy claims can be brought?

If someone believes that their redundancy was unfair or handled incorrectly, they may pursue the following claims to an Employment Tribunal:

• Unfair Dismissal – where there was no genuine redundancy situation or the redundancy process was flawed.
• Discrimination – where the redundancy selection criteria was based on a protected characteristic such as age, disability or pregnancy.
• Wrongful Dismissal – where the employer breached the employment contract, for example by failing to provide the correct notice.

Only employees (not workers or the self-employed) who have been continuously employed for at least two years are able to bring unfair redundancy dismissal claims in the Employment Tribunal. The only exception is where the employee can show that the redundancy was for an automatically unfair reason when there is no minimum continuous service requirement to bring a claim.

A wider range of individuals can bring a discrimination claim if they have been treated unfairly due to a protected characteristic. This includes employees, workers, job applicants, trainees and apprentices, partners in a firm and even self-employed individuals. Unlike claims for unfair dismissal, employees do not need to have been employed for two years to be able to bring a discrimination claim.

Similarly, a wide range of individuals can bring a wrongful dismissal/breach of contract claim and there is no requirement to have been continuously employed for any minimum length of time being bringing a claim.

What are the remedies for a successful unfair redundancy claim?

If an employment tribunal finds that a redundancy dismissal was unfair, it can award:

• Reinstatement – the employee gets their job back.
• Re-engagement – the employee is rehired in a similar role.
• Compensation – comprised of a basic award and a compensatory award.

The remedies for successful discrimination claims include:

• Uncapped compensation for injury to feelings based on the Vento bands, financial losses and aggravated damages.
• A declaration that the employer has acted unlawfully.
• Recommendations for the employer to take specific actions such as providing training and changing policies.

The remedies for successful wrongful dismissal/breach of contract claims is compensation to put the individual back into the position that they would have been had the breach not occurred.

What is the time limit for bringing an unfair redundancy selection claim?

An employee must bring an unfair redundancy claim to the Employment Tribunal within 3 months less one day from the date their employment ended.

Before filing a claim, the employee must notify ACAS and attempt early conciliation. This process can extend the time limit for bringing the claim.

Failing to file a claim with the Employment Tribunal, or commencing early ACAS conciliation, within the limitation period will mean that the claim will be statute barred and no further action can be taken in relation to it.

The time limit can be extended by an Employment Tribunal if it decides that it was not reasonably practicable for a claim to have been presented within the limitation period. It can be difficult to persuade an Employment Tribunal to exercise its discretion to extent time for presenting the claim. It is therefore imperative that specialist employment law advice is sought as soon as possible if an employee wants to make an unfair redundancy claim.

Contact our specialist employment law solicitors for advice on your redundancy situation

Redundancy is a challenging and emotive process for both employers and employees.

For employers, we explore your redundancy situation and provide advice throughout the process to aid your understanding of the legal framework and guide you through a fair procedure to help mitigate the risks and ensure compliance to avoid Employment Tribunal claims.

For employees who are either at risk of redundancy or who are being made redundant, we provide clear advice on your employment rights throughout the process and analyse the prospects of bringing a successful unfair redundancy claim in the Employment Tribunal if you are ultimately dismissed.

If you would like to speak to one of our specialist solicitors about a redundancy process or dismissal, please contact the Employment Team at 01457 761 320 or e-mail enquire@odonnellsolicitors.co.uk.