Redundancy
Redundancy situations are extremely difficult for both employer and employee, involving considerations of fairness, procedure, notice, redundancy law, and sometimes tax on redundancy payments. The term redundancy often covers a multitude of different situations and can also include voluntary redundancy. Whether employer or employee, at Darlingtons we have experienced lawyers who can offer peace of mind and act as guides on redundancy procedure, notice or tax, at a cost effective price.
What is a Fair Redundancy Dismissal?
- The redundancy grounds must genuinely exist.
- The employee must be treated fairly in the procedure used prior to the final decision to dismiss.
- The redundancy must be provable on its facts.
- The employee must be fairly selected and consulted with a view to avoiding redundancy.
Definition of redundancy
The statutory definition provides that the dismissal must be attributable wholly or mainly to the fact that:
- The employer has ceased, or intends to cease, completely or in an employment place, to carry on the business for the purposes for which the employee was employed; or
- The requirements of the business for the employee to carry out work of a particular kind, completely or in a particular place, has ceased or diminished, or is expected to.
There are basically three situations which may result in a redundancy situation:
- Either part or all of the business closes in which the employee works
- Demand reduction due to economic downturn resulting in less or no work.
- Business re-organisation resulting in less jobs or significant reduction in work available.
To remain fair the redundancy must also be procedurally correct which involves the use of appropriate selection criteria, identification of the selection pool, due consultation, adherence to relevant contractual matters and an overriding requirement that the redundancy is proven to be genuine.
A dismissal has occurred when:
- the contract is terminated either with or without notice to the employee
- a fixed-term contract expires and is not renewed
- the employee terminates their contract, with or with out notice, by reason of employers conduct.
A dismissal has not occurred when:
- a fixed-term contract is renewed
- a new contract of employment is issued within 4 weeks of a break in service
- the employee accepts a new job within the same group or employer
- the employee resigns prior to redundancy notice being issued. An employee may leave early, with the employers agreement, to start with a new employer as a result of the pending redundancy.
Suitable Alternative Employment
If an employer can offer alternative employment and that employment is accepted by the employee then the employer can avoid paying redundancy pay. However an employee can refuse that offer if he or she is able to establish that it is not reasonably suitable on a number of grounds. The grounds for refusal must be clearly stated, a simple refusal for no reason at all would be classed as unreasonable. If the employer refuses to accept the employee’s reasons for refusal the employee may submit an application to an Employment Tribunal. The Tribunal will look at both the suitability of the job offered, and the reasons for the employee’s refusal of the alternative job separately and come to separate decisions respectively.
When an offer of alternative employment is made it must be clearly stated what the changes are to existing terms and conditions to enable the employee to make a reasoned decision. The offer must be made before the existing contract and position is terminated and take effect within four weeks of that date.
An employee is entitled to ask for a trial period if the job offered is of a different nature. The statutory period is four weeks, but this can be extended. All the conditions of the trial period must be made in writing prior to the trial period commencing. There can only be three outcomes of a trial period:
- acceptance of the alternative job by continuing after the end of the trial period. There will be no dismissal and the employee acceptance of the alternative job by continuing after the end of the trial period.
- alternative job is unsuitable due to differences between the old and new job. In this case the employee will be deemed to have been dismissed on the original date within the redundancy notice and a redundancy payment is made accordingly.
- the employee unreasonably decides that a suitable job is unsuitable or unreasonably refuses to continue with the job. In this case the dismissal will not be deemed to take effect on the original date within the redundancy notice and the employee will not qualify for a redundancy payment.
Change of Employer
Under the Transfer of Undertakings (Protection of Employment) Regulations 1991 sometimes refered to as TUPE, if a business is acquired by a new owner/employer the period and continuity of service of an employee is not interrupted and no dismissal/re-hiring takes place. Therefore there is no entitlement to redundancy pay from the old owner/employer. However, the new employer may decide to make redundancies in which case the employee’s employment is treated as if there has not been a change of owner/employer.
Notification to the Department of Trade and Industry
Employers proposing to make 20 or more employees redundant at one establishment within a 90 day period must notify full details in writing to the Department of Trade and Industry in advance. Employers must do this at least 30 days before the first dismissal where 20 – 99 redundancies are proposed or 90 days before the first dismissal where 100 or more redundancies are proposed.
