By Abigail Grace Williams, Employment Law specialist at Lewis Nedas Law
With the Government’s Job Retention Scheme set to come to an end on 31 July 2020, many employers are now facing the decision as to whether or not they will need to make redundancies in order to ensure their business’ survival. Employers may also need to consider adapting their usual redundancy procedures taking into account the introduction of furlough leave under the Job Retention Scheme.
Below is some information arising from questions I am frequently asked with regard to making redundancies during the COVID-19 outbreak.
Circumstance in which an employee can be made redundant
Despite the Government’s introduction of the Job Retention Scheme, the usual rules on redundancies will still apply. However, there are some additional considerations that Employers should bear in mind, and the question of whether a genuine redundancy situation has arisen, by virtue of the coronavirus, may not be entirely straightforward.
Let us first consider the three circumstances in which an employee is able to be made redundant under the Employment Rights Act 1996:
- Business closure (altogether);
- Workplace closure (closure of one of several sites or relocation to a new site); and/or
- A diminished requirement of the business for employees to do work of a particular kind.
If an employer cannot satisfy one of the above criteria, in respect of the dismissal of an employee for the reason of redundancy (whether or not it is coronavirus-related), then there is a risk that the employee may be able to successfully bring a claim against the employer for unfair dismissal.
For specific considerations on redundancies being made before 31 July 2020, please see the below section.
Employers will need to think carefully about ensuring that redundancy pooling and selection processes are undertaken in a fair manner. In particular, employers should be careful if they are considering employees for redundancy based solely on the fact that they are furloughed, as there is a risk that this approach may give rise to an unfair (or even discriminatory) process or dismissal. This is also likely to be dependent upon the reasons for the employee(s) having been placed on furlough in the first place, and the selection process that was undertaken to do this.
Employers must also consider whether staff are entitled to be paid their full salary during their notice period (and for any annual leave taken during their notice period) when being made redundant. This is even if they are currently on furlough leave and only receiving 80% of their salary.
There is also a risk of claims from disgruntled employees (even those that have not been made redundant) if employers have not complied with all of their obligations under any employment contract(s). For example, if employers have unilaterally amended employee’s terms of employment to reflect a reduction in salary (to the level of furlough pay that is being claimed for that employee) then there is a risk, if the employer does not have the right to unilaterally amend these employment terms, that the employee(s) may have the basis for a claim in respect of the reduction of salary.
Employers will also need to give consideration to logistical issues such as carrying out a redundancy consultation process remotely and when some, or all, of the workforce may be on furlough leave.
Redundancies coming into effect on or before 31 July 2020
Considering the three circumstances outlined above, it would appear that by virtue of the coronavirus outbreak there would be, for the majority of businesses, a diminished requirement of the business for employees to do work of a particular kind.
However, employers are also under an obligation to consider alternatives to redundancy, and there is some ambiguity as to whether this could be deemed to include consideration of the Government Job Retention Scheme and whether an employee could have been put on furlough leave (whilst the scheme remains operational, at present until at least until 31 July 2020) before being made redundant.
Unfortunately, the Guidance Notes issued to date do not offer much insight or reassurance on this point and further clarification from the Government is welcomed.
Further, given the recent nature of COVID-19, such circumstances have not yet come before an Employment Tribunal and so it is difficult to determine whether a Tribunal is likely to find that employers will be expected to have considered placing employees on furlough leave (most likely with their agreement to a reduction in wages to the lower of 80% or £2,500) prior to making any dismissals.
The picture will undoubtedly become clearer for employers when the Job Retention Scheme comes to an end and there will be no option but to consider whether it is viable for the business to continue with the employment of all of its workers. The Guidance Notes issued to date are clearer in this regard and state that redundancies may be a necessity “when the government ends the scheme… depending on the Employer’s circumstances.”
However, given employees’ usual notice periods, employers, and particularly those who may need to consider making 20 or more employees redundant and who will need to bear in mind the ‘collective consultancy’ rules, may need to begin planning redundancies now to come into effect at a later date.
New Government guidance is being published on a regular basis, it is therefore vital for employers to stay up-to-date on the rules and keep any potential redundancy situations under review.
Collective Consultancies: When there are 20 or more redundancies (within any 90-day period)
If you are considering making 20 or more employees redundant (within any 90-day single period at a single establishment), you are obliged to follow ‘collective consultancy’ rules. If you do not, there is a risk that any dismissed employee may bring a claim for unfair dismissal. The requirement within these rules for employers to consult for at least 30 or 45 days before making redundancies may mean that employers need to consider laying the groundwork now if it necessary for them to make redundancies when the Job Retention Scheme comes to an end.
Should you be considering the redundancy of multiple employees, it is important that you obtain support and guidance throughout the consultation process to ensure compliance.
Additional payments due to redundant employees
Employees who are dismissed by way of redundancy are likely to qualify for a statutory redundancy payment (which must be calculated correctly).
In order to be qualified for a statutory redundancy payment, the employees must be employed for at least two years’ continuous employment. The calculation for the aforementioned payment is set out in Employment Rights Act 1996.
Employers must also be weary that there may be an express or implied contractual right to an enhanced redundancy payment over and above any statutory entitlement.
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