Redundancy – the impact of Covid-19 and how we can help

Chelsea Brooke-Ward and Nathan Davis provide a short summary as to the legal issues that can arise for those who have been made, or who face being made, redundant.

Introduction

Covid-19 has had a significant impact upon businesses in all sectors and, unsurprisingly, this has meant that many have had to take drastic action in order to ensure they are able to endure the coming months. An unfortunate victim of this circumstance is that many businesses have been forced to, or are considering, making staff redundant. What follows below is a short summary to assist individuals and companies in identifying potential issues that may arise in the context of redundancy.

The issues that will be explored below include:

• What is redundancy?
• Redundancy Procedure;
• Unfair Dismissal;
• Statutory Redundancy Pay;
• Time off to look for other work.

What is Redundancy?

Dismissal for redundancy is one of the potentially fair reasons for dismissal under s.94 Employment Rights Act 1996 (‘the ERA’). Although the term ‘redundancy’ is frequently used by employers when dismissing employees, it has a specific meaning which is defined by statute, as set out below. Only if the situation falls within the statutory definition can a genuine redundancy exist. Any dismissal not falling within the definition will not automatically be unfair, but may fall into another potentially fair reason under the ERA such as “some other substantial reason”.

Redundancy is defined at section 139 ERA. In summary, an employee will be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to one of the following:

1. 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

2. (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.

In relation to 1(ii) above, care needs to be taken in cases where there is a mobility clause within the employee’s contract (i.e. which may require the employee to work at other premises within a reasonable distance). In such circumstances the employee will have been dismissed by reason of redundancy if dismissed when their own workplace closes, even though there is a clause in their contract requiring them to work at a different branch (Bass Leisure Ltd v Thomas) [1994] IRLR 104. Often employees consider that given such clause they should, and are entitled to, be moved to a different location. However, in Bass the Tribunal held that an employee’s place of work for the purpose of redundancy is a question of ‘fact’, taking into account where the employee ‘actually’ worked. Terms such as mobility clauses that allow for employees to be moved from one place to another are irrelevant for redundancy purposes. The Tribunal stated that expanding the location of work would be going too far.

However, a refusal to work at an alternative location may affect the employee’s entitlement to redundancy pay (see below) and may mean that they are found to have been dismissed by reason of misconduct, rather than by means of redundancy for failing to follow reasonable management instruction in compliance with such clause (albeit such clause is subject to the provisions on reasonableness which is beyond the scope of this article).

In regards to 2 above, there does not need to be a reduction in the workforce: the fact that the employee is dismissed because they are unwilling to work on a reduced temporal basis (i.e. from full-time to part-time) will be a dismissal by reason of redundancy as was found in Packman (t/a Packman Lucas Associates) v Fauchon [2012] UKEAT /0017/12. The EAT in Packman, overruling an earlier decision, stated that “in such cases, the statutory wording must be specifically considered. Therefore, the need “for employees to carry out work of a particular kind” had diminished in this case, even though there had been no reduction in the need for a specific number of employees”. Thereby there was a redundancy dismissal entitling the Claimant to a redundancy payment.

It should be noted that an employee is presumed to have been dismissed by his employer by reason of redundancy unless the employer is able to prove otherwise (section 163(2) ERA). Therefore, unless an employer shows otherwise an employee will be entitled to redundancy pay (subject to entitlement).

Procedure and Unfair Dismissal

If a dismissal falls within the statutory definition above that does not make such dismissal automatically fair. Prior to a dismissal for redundancy a fair procedure must have been adopted and that procedural aspect needs to be fair as well. This means that when an employer is selecting employees who are at risk of redundancy this must be done in a transparent and unbiased way.

Where an employee feels that there is not a genuine redundancy situation or feel that they have been unfairly selected or a fair redundancy procedure was not followed, they may be entitled to bring Tribunal Proceedings for Unfair Dismissal pursuant to s.94 ERA 1996. An employee can only bring such claim under the ERA where they have 2 years qualifying service.

As with other potentially fair reasons, the fairness of a redundancy dismissal will also be determined by the test of whether the decision to dismiss for redundancy falls within the range of reasonable responses of a reasonable employer in those circumstances and in that line of business. Therefore, failure to follow a fair procedure will normally render the dismissal unfair.

A fair procedure comprises a number of stages:

1. warning and consultation
2. fair basis for selection
3. consideration of alternative employment
4. opportunity to appeal

Where there is an agreed redundancy procedure or policy this should be adhered to. Although failure to abide by an agreed redundancy procedure will not in itself render the dismissal unfair, the Tribunal will be inclined to take it into consideration when determining such question.

The primary case concerning fairness of redundancy is Williams v Compair Maxam Limited.  The Court gave guidance as to what certain steps an employer should follow:

• An employer should seek to give as much warning as possible of impending redundancies so that the union and the employees can consider possible alternative solutions and alternative employment.
• An employer should consult the union (if one is present) as to the best means by which the desired management result can be achieved with as little hardship to the employees. The employer should seek to agree with the union as to the criteria to be applied in selecting the employees to be made redundant.
• The objective criteria should, as far as possible, be capable of being checked against such things as:
  • attendance record;
  • efficiency at the job; and
  • experience or length of service,

and should not purely depend upon the subjective opinion of the person making the selection.

• The employer should make sure that selection is made fairly in accordance with the criteria and consider any representations the union may make regarding selection.
• The employer should consider whether there is any alternative employment to offer the employees.”

Warning and Consultation

In most cases there should be consultation with the employee which should focus upon consideration of alternatives to redundancy. The consultation must be ‘fair and genuine’ as was found in the case of Rowell v Hubbard Group Services Ltd [1995] UKEAT /44/94. However, it was accepted in Rowell that the need for consultation may not be reasonable in every case. This will depend upon a number of factors such as the nature and the size of the business.

Selection of the pool of employees and the criteria

The employer must select a fair pool which is used to determine which employees will be considered for redundancy. This is a matter primarily for the employer, as held in Taymech Limited v Ryan [1994] UKEAT/663/94. In Taymech, the Claimant was dismissed as she was the only telephonist, however upon reviewing her duties – irrespective of her job title – the Court stated there could have been meaningful comparison between her skills and those of four or five other administrative workers in the office, whom should have been pooled with the Claimant. The Court in Samels v University of Creative Arts [2012] EWCA Civ 1152 at [12] endorsed the view that the pool should not only include those employees doing work of a particular kind, but also those employees whose jobs are similar to, or interchangeable, with the employees doings a particular kind of work. It is therefore, important to look beyond the job title of the employees when deciding which employees should be pooled, and focus more on the duties the employees are carrying out, and decide whether it could be argued that the duties were similar. Bear in mind they do not need to be exactly the same for such employees to be pooled.

Once the pool of employees is selected, the employer must impose reasonable selection criteria to decide who is made redundant. Such criteria should be, as far as possible, objective and not based upon the subjective view of the decision-maker (Hartley & Anor v Marshalls Mono Ltd [1995] UKEAT /481/4). This means that the decision should not be based upon who is the favourite of the decision-maker, but on a comparison of objective grounds such as timekeeping, attendance and disciplinary record.  Careful consideration also needs to be given to avoid any discrimination. For example, utilisation of a last in first out method has been criticised in the past as being potentially discriminatory on grounds of age, (“Joanne Allan v Oakley Builders and Groundwork Contractors Ltd: 1403798/2018”). Whilst there was no discrimination found in Allan the court identified that there may well be times when those with shorter service will be much younger than the employees with longer service and may in those circumstances amount to discrimination. Likewise, making someone Redundant because they have the highest sickness absence could be disability discrimination if the employee falls within the definition under the Equality Act 2010 as disabled. Careful consideration needs to be given to the selection criteria and employers should be as transparent and objective as they can be in the circumstances.

Alternative employment

In most cases an employer will be expected ‘to do his best to see whether there is another role in the organisation which an employee at risk of redundancy can be offered, but it does not have to be at the same grade’ (Samels v University of Creative Arts [2012] EWCA Civ 1152 at [26]). Furthermore, any offer of alternative employment must be offered on reasonable terms (Elliott v Richard Stump Ltd [1987] IRLR 215). Although there is no obligation on an employer to offer like-for-like work.

Where there is an unreasonable refusal of the offer for alternative work, this may affect the employee’s claim under unfair dismissal (as stated in Chard v Hartlepool Borough Council [1992] UKEAT /202/91) and/or to statutory redundancy pay as outlined below.

A claim for unfair dismissal must be presented to the Employment Tribunal within 3 months after the effective date of termination (i.e. the date where notice expires, or where notice is not given then the date that termination of the employment contract takes effect (section 97 ERA)), subject to any extension for ACAS Early Conciliation. The Employment Tribunal has the power to extend such limitation where it was not reasonably practicable for the complaint to be presented before the end of that period (Section 111 ERA). This is an extremely high hurdle to surmount, so it is imperative that claims are issued on time.

Redundancy pay

The starting point under section 135 of the ERA is that an employer shall pay the employee redundancy pay where: a) the employee has been dismissed for redundancy; or b) is eligible for payment by reason of being laid off or kept on short-time. This article focuses upon the former.

The employee, therefore, has an enforceable right to redundancy pay from their employer. However, there are requirements that the employee must satisfy before they can qualify:

1. s/he was an employee;
2. s/he were dismissed by reason of redundancy – note presumption outlined above;
3. s/he was continuously employed for a period of not less than two years ending with the date that notice expires, or where notice is not given on the day when termination of the employment contract takes effect (sections 155  and 145 ERA).

In relation to the second point. An employee will be shown not to have been dismissed by reason of redundancy where:

a)    S/he were subject to summary dismissal in accordance with section 140 ERA;

b)    S/he unreasonably refused an offer to accept to renew or to re-engage with a new contract of employment which is an offer of suitable employment (section 141 ERA). For example, the employee may not be entitled to redundancy pay where they have unreasonably refused the offer to work at a suitable alternative location.

Specific provisions also apply in the case of employee’s who are given notice and seek to leave before this period expires (sections 136(3-4) and 142 of the ERA) and potentially where the employee goes on strike after they have been given notice (section 143 ERA).

In circumstances where the employer relies upon the offer a suitable offer of employment, it is upon the employer to show that it was suitable (Kitching v Ward [1976] ITR 464) and the offer must have been made before the end of employment and was to take effect not more than four weeks after that date. It is also for the for the employer to show that any refusal was unreasonable. The question of reasonableness “depends on factors personal to the employee and is assessed subjectivity from the employee’s point of view at the time of the refusal“(Devon Primary Care Trust v Readman [2013] EWCA Civ 1110 at [21]).

The amount of redundancy payment to be awarded is governed under section 162 ERA and is primarily dependent upon the length of employment. An employee/employer can use the online calculator to calculate the redundancy payment by using the link here and completing the relevant parts of the form.

A claim for redundancy payment must be made within 6 months (subject to any extension for ACAS Early Conciliation) in accordance with section 164 ERA; however, the Tribunal has the discrimination to disapply such limitation where they find that it is just and equitable to do so. This is not to be confused with a claim for unfair dismissal where the limitation is 3 months (discussed above).

Time off to look for other work

Under section 52 ERA, once an employee has been given notice of dismissal by reason of redundancy, they are entitled to take reasonable time off during their working hours to look for new employment or to make arrangements for training for future employment. However, this is subject to the fact that the employee must have been, at least, continuously employed for a period of two years by the time that the date of notice is due to expire.

An employee has a further right, under section 53 ERA to be paid for any time taken off under section 52. This payment is also due where an employer unreasonably refuses to permit the employee to take time off work under section 52 (section 53(4) ERA).

It should be noted that the employee will not be able to take off any time which is unreasonable and that any time spent which is not for one of the specified exceptions will not be permitted. This entitlement is not available to police officers, mariners and members of the armed forces.

Any claim sought to be raised that the employer unreasonably refused to allow time to be taken off, or failed to pay any amount due under section 53 should be brought within 3 months from when it is alleged that the time off should have been permitted (subject to any extension for ACAS Early Conciliation), unless the Employment Tribunal finds that it was not reasonably practicable for the complaint to be presented before the end of that period (section 54 ERA).

We acknowledge that this is an extremely worrying and stressful time for all our readers, and we hope the above assists you. However, If you require any specific or additional legal advice which has not covered in this article above, please get in touch with our Employment Team on clerkscivil@psqb.co.uk or call 0113 245 9763.

Chelsea is a civil practitioner with a focus on employment law and professional misconduct.

Nathan is a common law pupil currently undertaking his second-six.