Solicitors in Westminster, London
Conducting a fair Redundancy process
Conducting a fair Redundancy process
Regrettably, redundancies are likely to become increasingly frequent in the coming months due to the economic downturn caused by the COVID-19 pandemic. Employers will need to be more aware than ever of how to identify and then manage a redundancy process and employees need to know their rights and recourse should they be unfairly dismissed under the guise of redundancy.
Genuine Redundancy Situation
First, there must be a 'genuine redundancy situation'. This is governed by s.139 Employment Rights Act 1996 and identifies three scenarios in which an employer may legitimately make redundancies. They are:
- Where the employer has ceased or intends to cease—
- to carry on the business for the purposes of which the employee was employed by him, or
- to carry on that business in the place where the employee was so employed, or
- the requirements of that business—
- for employees to carry out work of a particular kind, or 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.
Usually, but not always, the underlying reason for a redundancy will be economic – ie. the business can no longer afford three people carrying out a particular role and need it to be carried out by two instead. Reorganisations and restructures resulting in dismissals do not necessarily mean redundancies. There is a potentially fair reason for dismissal called Some Other Substantial Reason which can allow an employer to dismiss an employee in these scenarios without paying a redundancy payment.
As with any dismissal, there needs to be a potentially fair reason for dismissal (redundancy being one) and the dismissal needs to be handled fairly. For a redundancy dismissal it is accepted good practice to consult with the employees at risk. A dismissal that is either not for a fair reason or is procedurally unfair may give the employee an unfair dismissal claim (provided they have 2 years' service by the date of termination)
It is key that employers first notify and then consult staff members who have been identified as being at risk of redundancy. Failure to do so will almost certainly be deemed unfair. This article deals with circumstances where fewer than 20 employees are being made redundant at one time. Where more than 20 are being made redundant at one time, there is a statutory procedure to follow which is outside the scope of this article.
Redundancy consultation must be meaningful and should be a genuine two-way dialogue aimed at avoiding dismissals, or at least reducing the number of dismissals and, if dismissals are unavoidable, mitigating the consequences of dismissal.
Whilst there is no minimum time period over which a redundancy consultation must be held, it needs to be long enough to be reasonable and meaningful in the circumstances. This could range from a week in a very simple situation through to a month or possibly more when there are greater numbers and complexities involved.
During consultation, employees should be told of the business reasons for the proposed redundancies, options open to the business and ways the business is looking at avoiding dismissals. The employee should be invited to comment and make suggestions. Both parties should be looking to identify suitable alternative roles within the organisation.
It is crucial that no decisions have been taken before consultation which would render the consultation a sham. The consultation does not have to end in agreement, but it must be carried out with a view to reaching it.
An employer must still consult its employees during the coronavirus (COVID-19) pandemic, but it may do so remotely. There is no legal requirement for consultations to take place face-to-face.
Selecting employees for redundancy
Those at risk of redundancy should be placed into 'pools'. A pool will be a group of employees who carry out the same or similar functions where those functions are going to be impacted by the proposed redundancy situation.
When it comes to the employer selecting those from the pool that are going to be made redundant, there must be a fair and objective assessment exercise otherwise, again, subsequent dismissals may be challenged as unfair.
The employer should first decide upon its selection criteria and then apply that criteria fairly. There are no set criteria although commonly employers will look at:
- Length of Service
- Skills, qualifications and experience
- Attendance and disciplinary record
Care is required in the choice of criteria and the employer must be aware when it comes to application of the criteria not to make a decision that is indirectly discriminatory. For example, an employee with a known disability who has required extra time off should not be scored down on their attendance record. Another potential hazard is the inevitable subjectivity required in scoring an employee's skill – the employer must be able to objectively justify their scoring as transparently as possible. It should go without saying that employees must not be chosen based on, protected characteristics such as their age, sex, race, religion etc.
Assessments of the employees should be completed by someone with direct knowledge of their work, with written records of the reasons for scores given and decisions made.
Finally, an employer needs to be aware that someone on maternity leave whose role is selected for redundancy must be given priority in the placement in a suitable alternative role over someone not on maternity leave.
There are many situations in which an employee may appeal against being made redundant. Most commonly, an employee will challenge their redundancy if:
- Their employer did not follow a fair redundancy process
- The redundancy was not genuine
- The reasons for their selection were potentially discriminatory
When confirming the redundancy, the employer should inform the employee of their right of appeal. Any appeal should then be heard in accordance with the organisations published policy or, if there is no such policy, following ACAS guidelines. It is unusual for a redundancy decision to be overturned on appeal but the employer must be open minded and conduct the appeal fairly.
Some employers will routinely conclude a redundancy within a settlement agreement but there is no requirement to do so. The employer must, as a minimum give the correct period of notice under the contract and pay statutory redundancy pay as a minimum.
If you require further information on anything in this article, please contact Ed Henderson (firstname.lastname@example.org).
The contents of this article do not constitute legal advice and are provided for general information purposes only. The contents are copyright of Lee Bolton Monier-Williams LLP. All rights reserved.