What are the implications of re-employing former employees who had previously been made redundant? Esther Smith, partner at Thomas Eggar, and Martin Brewer, partner and employment law specialist at Mills & Reeve, advise.
The question:
My company has recently undergone TUPE re-organisation and redundancy (they had good economical reasons to do this). This was a massive exercise to undertake all at once and we came through unscathed with just a few tears along the way. Things seemed to have settled down and the re-organised shifts were quite happy.
Now there has been a sudden rush of business which is to stay for the foreseeable future and we are having to recruit, but not on the departments affected by redundancy, which is good news.
We had to lose some people due to their positions being redundant but we did offer them positions on other departments but some declined and took redundancy. Now my bosses have contacted one of our ex-employees, who is still receiving pay in lieu of notice and is due to receive statutory redundancy pay next week, and offered him a position in a different department than he worked in before. They have asked him to re-start his employment with us, once he has received his redundancy pay and has reached his final employment date. He will not have continuous service.
Is this okay to do, as the rumblings have now started amongst the workforce? If we have vacancies, do we have an obligation to contact those who took redundancy to re-employ? I have heard that if we re-employ within eight weeks of making them redundant, we can ask the employee to re-pay their redundancy pay.
Legal advice:
Esther Smith, partner, Thomas Eggar
There is nothing to stop you re-employing former employees who were previously made redundant, and in this case it appears that there has been a genuine change in the company’s position. It also appears from what you say that the employees who were made redundant were given the opportunity for other roles in the company before being made redundant, but chose not to accept them.
Whilst there is nothing to prevent you re-employing someone, there are some potential consequences of doing so. If the employee is still technically employed by you, and is either on garden leave or working their notice, then there is a real risk that their new employment would be deemed to be continuous with their previous employment.
This would be as a result of either the application of the ‘statutory bridge’ (which provides that if an employee is covered by a contract of employment for the same employer within a week, the employment between the two contracts is deemed to be continuous) or because the promise of future employment was made to the employee before the end of their old employment and therefore this bridges the gap as a matter of evidence.
If the employment has already ended and these employees were being paid in lieu of their notice when they were approached for the new jobs, there is less chance of this happening. However you could always agree with the employees that their employment would be continuous but in this case you would normally expect people to repay their redundancy payment.
The other possible implication is on the tax, as if their employment is continuous or the arrangements to return are made before the first period of employment ends, the revenue may consider that the ‘redundancy’ payment made was not a genuine redundancy payment and therefore treat it as taxable.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information please visit Thomas Eggar
* * *
Martin Brewer, partner and employment law specialist, Mills & Reeve
A fairly long question but a fairly short answer.
The legislative provisions dealing with re-employment in a redundancy situation and its effect on redundancy pay are all predicated on the principle that an offer to re-employ an otherwise redundant employee is made BEFORE the end of the existing contract (see sections 138 and 141, Employment Rights Act 1996).
That hasn’t happened in your case. The employment ended, the employee was paid in lieu of notice and is entitled to his redundancy pay. The fact that you now wish to re-employ him gives him a windfall. If he accepts the offer of a job with you he doesn’t lose either his redundancy pay or his pay in lieu of notice.
What this highlights of course is the danger of pay in lieu in these circumstances. If the employee had been required to work out his notice, the new jobs would have arisen before termination and the company may well have saved itself notice pay and redundancy pay.
Martin Brewer is a partner at Mills & Reeve. Martin can be contacted at: martin.brewer@mills-reeve.com
* * *
