Redundancy is a potentially fair reason for dismissal. Broadly, a genuine redundancy situation arises in one of the following circumstances:
(b) The employee’s workplace disappears.
(c) The need for employees to carry out ‘work of a particular kind’ has ceased or diminished or is expected to cease or diminish.
This third situation can arise in two ways. The particular kind of work (for example, the “work of an account manager”) may have fallen off so that fewer employees are needed to carry out that kind of work. Alternatively, the level of business may remain the same but the employer may simply need fewer people to do ‘work of a particular kind’. Unless the employer can prove that one of these has genuinely occurred a claim for unfair dismissal will succeed. The employer must also follow a “fair procedure”.
If fewer than 20 redundancies are being proposed then the Standard Dismissal and Disciplinary Procedure (SDDP) must be followed. In summary, for each affected employee this involves; a letter of warning, a meeting and a right of appeal. The employer should also consider alternatives such as restricting recruitment of new staff, not filling vacancies arising, restricting the use of temporary staff or retiring those beyond the normal retirement age.
When 20 or more redundancies are proposed in a 90-day period; the employer must comply with the collective consultation obligations as set out in the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”).
During the collective consultation process, the consultation must cover ways of: avoiding the dismissals, reducing the numbers to be dismissed and mitigating the consequences. When consultation should take place depends on the number of proposed redundancies, as follows:-
100 or more employees: “in good time” and in any event at least 90 days before the date the first dismissal takes effect.
Between 20 and 99 employees: “in good time” and in any event at least 30 days before the first dismissal takes effect.
The employer must consult all persons who are appropriate representatives of any of the employees affected. In the recent EAT decision in UK Coal Mining Limited v National Union of Mineworkers (2007) it was held that the employer must consult about the business decision to make employees redundant, not just about ways of avoiding the dismissals. This entails consultation at a much earlier stage in the process than previous case law had envisaged.
Employers should be seen to enter into the process with an open mind and cannot properly consult over something that they have already decided to do. Consultation must therefore begin while the proposals are still at a formative stage and must now include consultation on the reasons for the redundancies. However, there is no obligation to accept any proposals put forward by employees in consultation.
The employer must also notify the Secretary of State. If the employer proposes to dismiss 20 to 99 employees this must be done at least 30 days before the first dismissal is made; if more than 100 it should be done at least 90 days before the first dismissal.
Employers should note the implications of Optare Group v TGWU (2007). In this case 17 compulsory redundancies were made following 3 voluntary redundancies. The union alleged that the collective consultation requirements were engaged, as the employer proposed to make 20 people redundant. The employer however contended that the 3 voluntary redundancies; employees who “left themselves” should not be included. The ET and EAT held that one should instead look at who is responsible for the dismissals. As the employer had proposed to make 20 people redundant (thus including the voluntary redundancies) within a 90 day period, the collective consultation provisions were engaged and a protective award could be made.
Employees must have two years’ continuous service to be eligible for redundancy payments. For each complete year of service, up to a maximum of 20 years, employees are entitled to:
- for each year of service under 22 – ½ week’s pay
- for each year of service from age 22 but under 41 – one week’s pay
- for each year of service from age 41 or over – 1½ weeks’ pay.
A week’s pay is subject to the maximum statutory limit of £310 (rising to £330 for dismissals taking effect on or after 1 February 2008).