The widely reported redundancies in the US tech sector are now being reflected in the UK market. At Fox Williams, we have received a growing number of inquiries from clients about the likely need to make redundancies due to reductions in user activity and difficulties in accessing funding due to a difference in the growth that was envisaged during the pandemic and what has materialised post-pandemic.
In this article, we will cover some key points for UK employers to watch out for if they elect to make redundancies.
The importance of meaningful consultations
Employers ought to manage redundancies carefully because of the legal action that can be brought against them by employees.
Employees with more than two years’ qualifying service can bring claims of unfair dismissal. To avoid being liable for unfair dismissal, employers should engage in ‘meaningful consultation’ with affected employees during a series of individual meetings. Such consultation would include identifying an appropriate pool for selection, applying objective selection criteria to those in the pool, consulting with individuals inside the pool, and notifying employees of any suitable alternative employment.
If employees feel they have been targeted for unlawful reasons, there are potential discrimination or whistleblowing claims that can be brought against the employer. Employees do not need two years’ service to bring discrimination or whistleblowing claims.
The financial implications
Defending claims can be very costly for employers.
Unfair dismissal claims can lead to the employee being re-engaged by their employer or a monetary award. Payments to successful claimants are comprised of a basic award (i.e. a statutory redundancy payment) and compensatory payment. The Government has a calculator for statutory redundancy payments which is available here. The compensation payment for unfair dismissal is based on the employee’s net loss of earnings, capped at the lower figure of one year’s gross pay or £93,878.
Successful claims for discrimination can be even more costly since there is no cap on the amount of compensation an employee could recover (although employees are under an obligation to try to mitigate their losses). Successful claimants can also recover damages for injury to feelings in discrimination claims.
Collective consultation
Where 20 or more employees are being made redundant in a period of 90 days or less, employers will have a duty under the Trade Union and Labour Relations (Consolidation) Act 1992 to engage in a more prescriptive consultation with appropriate elected representatives. There is also a requirement to notify the Secretary of State.
Failure to comply with the collective consultation rules may lead a Tribunal to award up to 90 days’ pay in respect of each employee.
A lesson from the Employment Tribunal
In the recent case of Mogane v Bradford Teaching Hospitals, the Employment Tribunal provided some useful guidance, confirming the importance of individual consultation.
Ms Mogane was dismissed by Bradford Teaching Hospitals (BTH) by reason of redundancy. She had worked for BTH as a nurse since 2016 on a series of one-year fixed-term contracts, the last of which was due to expire on 1 June 2019. Another nurse was engaged on a two-year contract with an expiration date later than that of Ms Mogane’s contract.
BTH chose Ms Mogane for redundancy on the basis that her contract would expire earlier than that of her colleague. No suitable redeployment alternatives were available, so the redundancy proceeded at the end of her fixed-term contract.
Ms Mogane argued that her dismissal was unfair on the basis that BTH had failed to carry out any consultation or consider alternatives to basing its redundancy decision on which nurse’s contract would expire first.
The Employment Appeal Tribunal upheld Ms Mogane’s complaint and concluded that her dismissal was unfair because BTH had made an arbitrary choice to focus on a single selection criterion which resulted in a pool of one employee. The decision to select Ms Mogane as redundant had essentially already been taken by the time it was discussed with her, so subsequent consultation was meaningless.
Key takeaways for employers
The Tribunal emphasised the importance of genuine and meaningful employee consultation with a potentially redundant employee at a stage where the consultation can potentially influence the outcome.
If an employer intends to rely on limited selection criteria which will earmark a single employee for redundancy despite the fact there are other employees in comparable roles, the consultation should cover the use of those limited criteria before they are applied. In particular, the employer will be expected to consider whether this is a reasonable approach and to take account of the employee’s views.
A less risky approach would be to use several objective selection criteria against which comparable employees are scored and provisionally selected for redundancy. Common criteria might include, for example, performance and skillset, relevant experience, disciplinary record, absenteeism and future potential. The process should be fully explained to the relevant employees and their views considered so far as possible.
A transparent and objectively fair redundancy process which reflects this approach (and is supported by a paper trail) is far less likely to result in a successful claim for unfair dismissal.
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