As a result of the current COVID-19 pandemic, several legal issues have started to arise, particularly in relation to employment rights and making redundancies.
In order to fully understand redundancy, we must first consider the three circumstances in which an employee can be made redundant:
- 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, then there is a risk that the employee may be able to successfully bring a claim against the employer for unfair dismissal.
There is a three-stage test which needs to be applied to any redundancy situation:
- Was the employee dismissed;
- If so, had the requirements of the business for employees to carry out work of a particular kind ceased or diminished (or did one of the other economic states of affairs in section 139(1) Employment Rights Act 1996 exist); and
- If so, was the dismissal of the employee caused entirely or mainly by the state of affairs established at stage 2 above.
There will only be a true redundancy situation if the answer at all three stages is "yes". If the above test cannot be satisfied, employers may leave themselves open to potential unfair dismissal claims.
Some examples of where potential redundancy scenarios may arise are addressed below.
Outsourcing work previously done by employees
A redundancy scenario is likely to arises where an employer outsources work formerly carried out by its employees.
In such situations, although the need for the work continues to exist and the same number of individuals may continue to undertake the work, the employer no longer requires its own employees to do that work.
The Employment Tribunal has previously determined that "If an employer chooses to engage outside contractors instead of employees to do work of a particular kind he no longer requires employees to do it. That in our view clearly falls within the definition of redundancy.”
If an employer relocates work of a particular kind from one location to another and subsequently dismisses employees as a result, this is also likely to amount to redundancy. This is because the need for the particular type of work, in the initial location, will cease or diminish regardless of whether that initial location stays open for other types of work.
Employers should also be aware of any mobility clauses expressly stated, or implied, into the terms of an employee’s contract, such clauses allow the employer to relocate the employee to another place of work, and legal advice should be sought as the implications of any such term with regard to any potential redundancy situation.
It should also be noted that there will be a redundancy situation if the employee’s place of work is closed all together.
Changes to an employment contract or reorganisation
Mere changes to an employee’s contractual terms or working methods do not usually constitute a redundancy scenario, however in some exceptional circumstances they may do.
The view of the Employment Tribunal is that the focus should be solely on the work to be carried out. Whether this will amount to redundancy will have to be determined on a case by case basis.
Sometimes disputes arise when an employer proposes to amend the terms of any employee’s contract and employers must be aware of potential unfair dismissal claims in these circumstances.
Employers should also be aware of finding themselves in a situation whereby an employee at risk of redundancy is deployed into an alternative role, and the individual who previously undertook that role is dismissed as redundant instead (this is commonly known as “bumping”). In such circumstances, there is a risk that the “bumped” employee may bring a claim for unfair dismissal.
Reductions in working hours
If there is a reduction of working hours of employees, then potentially there can be a redundancy situation.
However, replacing part-time work with full-time work, for example, does not always amount to redundancy and this should be considered on a case by case basis.
Redundancy Consultation Process
If you are an employer and 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.
There are no expressly set rules to follow in circumstances where an employer is planning to make less than 20 redundancies however the dismissal, if for the reason of redundancy, should still be undertaken in accordance with certain steps in order to minimise the risk of any unfair dismissal claims being brought.
Should you be considering the redundancy of multiple employees, we can provide you with support and guidance throughout the consultation process should you wish for it.
It should be noted that volunteers for redundancy, during the course of any consultation process, are deemed to be “dismissed” employees for the purposes of any employment rights claim and therefore care must still be taken with such employees.
Employees who are dismissed by way of redundancy are likely to qualify for a statutory redundancy payment (which must be calculated correctly) and may also be able to potentially challenge the legality of the termination of their employment.
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.
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.
Get Redundancy Help & Advice for Employers
Contact our employment specialists at Lewis Nedas today to see how we can assist and advise you in respect of any potential redundancy situations that you may have.