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09/08/20 Employment Law Update

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13/07/20 Employment Law Update

Redundancy ‘Step by Step Guide’

Managing Redundancies – key steps to consider

With the gradual phasing out of the Coronavirus Job Retention Scheme, and prevailing uncertainty regarding the speed with which the economy is likely to recover from the effects of the pandemic, many employers are unfortunately in the position of needing to implement drastic cost-saving measures in order to survive. Where such measures involve job losses there can be exposure to unfair dismissal claims, particularly as many of those who are dismissed will find it difficult to find alternative employment. We look at the steps employers can take to mitigate the risks.

1. Consider whether there is a genuine redundancy situation

An employer must demonstrate that the dismissal is for a reason that falls within the statutory definition of a redundancy. An employee is dismissed by reason of redundancy if:

i) the employer has ceased or intends to cease carrying on the business for the purpose of which the employee was employed

ii) the employer has ceased or intends to cease carrying on that business in the place where the employee was employed

iii) the requirements of the business for employees to carry out work of a particular kind, either generally or in the place where the employee was employed, have ceased or diminished, or can be expected to cease or diminish

In short, dismissal is due to redundancy where it is due to the closure of the business, the closure of the employee’s workplace or the employer’s reduced need for employees to do work of a particular kind. It is worth noting that in the case of the latter, the reduction in work does not necessarily need to be the kind of work that the employee is employed to do. Thus “bumping” situations, where an employee is dismissed to make way for another employee whose role no longer exists, can satisfy the definition.

2. Apply a fair selection procedure

Unless the redundancy involves a stand-alone role, an appropriate selection pool should be identified. Quite often this will not be clear cut, especially where there is some degree of interchangeability/overlap between roles. Provided that the employer has applied its reasoning to the question of what the correct pool should be, however, and its decision is found to fall within the “range of reasonable responses of a reasonable employer”, a Tribunal will be reluctant to interfere. For this reason, an employer would be well-advised to document its discussions/considerations regarding the appropriate selection pool.

Reasonable selection criteria should then be applied to those employees in the pool. It is advisable to include at least some criteria which are purely objective, such as absence, attendance and disciplinary record. However, more subjective criteria, such as performance and skills, can be included provided that the employer adopts a fair means of applying them. This may involve having more than one assessor to reduce the potential for bias. It is also crucial that assessors are able to justify the scores awarded by reference to examples.

Even where criteria are purely objective, consideration should be given to any aspects of the criteria that may be potentially discriminatory. As an example, absence which is related to an employee having a condition which is deemed to be a disability under the Equality Act, or which is due to pregnancy or maternity, will need to be discounted.

3. Consult with affected employees

In situations involving 20 or more redundancies, employers have a statutory duty to inform and consult on a collective basis. Where the employees in the pool are represented by a recognised trade union, the employer must consult with the union. Where employees are not represented by a union, the employer will be required to make appropriate arrangements for the affected employee to elect one or more representatives with whom the employer must consult. Consultation must commence at least 30 days prior to any dismissals (45 days where there are 100 redundancies or more) and must be undertaken in a genuine attempt to reduce the need for redundancies or to mitigate their consequences. The financial penalties for employers who fail to comply with their obligations in this area are significant, with awards of up to 13 weeks’ pay for each affected employee.

Regardless of how many redundancies are being contemplated, the employer still has a duty to engage in ‘meaningful’ consultation with affected employees on an individual basis before taking the decision to dismiss (this will be in addition to collective consultation where applicable). In the vast majority of cases this will involve at least 2 individual meetings with the employee, during which they should be given the opportunity to put forward any counter-proposals or suggestions to avoid the redundancy, including being give the opportunity to challenge their scores in any selection exercise. Whilst there is no statutory right for employees to be accompanied to such meetings by a work colleague or Trade Union representative, failure to allow this may contribute to a finding of unfair dismissal.

4. Consider any opportunities for alternative employment

Finally, the employer must show that proper consideration has been given to opportunities for alternative employment and should conduct a reasonable search throughout its organisation. Even jobs which involve a reduction in pay / status should be brought to the attention of affected employees, particularly in the current environment where many people are being forced to accept jobs which they may not previously have considered. In some circumstances, it may be deemed to be reasonable for the employer to consider making a more junior employee redundant in order to retain a more senior one, something which is known as “bumping”. Whether this is reasonable would depend upon the particular circumstances of the case.

Wherever an alternative role is offered and accepted, a statutory trial period of 4 weeks will apply (which can be extended at the agreement of both parties) during which dismissal would still be deemed to be by reason of redundancy where the alternative role is found by either party not to be suitable.

5. Right of Appeal

It will very rarely be fair to make an employee redundant without offering them the opportunity to appeal the decision. Such appeal should ideally be with someone who has not been involved in the redundancy process, and who has sufficient seniority to be able to overturn the decision if they feel it to be unfair.

Making redundancies can be a daunting process, but by considering all of the steps outlined, an employer will greatly reduce the prospect of unfair dismissal claims.