With unemployment predicted to rise over the next couple of years, and fears of a recession on its way, Charles Price offers his advice on how to ensure employers follow a fair redundancy process.
The British Chamber of Commerce predicts UK unemployment will rise by between 250,000 and 300,000 in the next 18 months to two years. That could take the jobless total to more than 2 million for the first time since 1997.
Inevitably, there will be increased redundancies as a result. Long gone are the days, however, when an apologetic boss can get away with leaving your P45 on your desk without a trace of compunction. The law in this area is pretty complicated and if you are an employer who is expecting to have to make redundancies you should seek professional advice.
In short, the law is geared around making sure that the employer has thought of every alternative to redundancy and has included the input of those in the frame for redundancy in their thinking process.
The burden is on the employer
In determining whether the dismissal of an employee is fair or unfair, it is for the employer to show that the employee was redundant. In unfair dismissal cases the onus of proof is on the employer to show the reason, or, if more than one, the principal reason for dismissing the employee in redundancy, or he risks a ruling of unfair dismissal.
If the employer does prove that the reason for the dismissal was one of those referred to above, the employment tribunal must then decide “in accordance with equity and the substantial merits of the case” whether the dismissal was fair or unfair.
There is no onus of proof on either the employer or employee for this purpose – the employment tribunal must simply take into account all the circumstances, including the size and administrative resources of the employer’s undertaking. This certainly does not mean that if you are a small employer you can circumvent the law.
The Employment Rights Act 1996 provides that: “For the purposes of this Act, an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to:
(a) the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or (ii) to carry on that business in the place where the employee was so employed, or (b) the fact that the requirements of that business -for employees to carry out work of a particular kind, or
(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer have ceased or diminished or are expected to cease or diminish.”
If the respondent can show that there was a redundancy situation, the tribunal should ask the question: ‘Was the dismissal fair in accordance with S98(4) or the ERA and the range of reasonable responses open to the employer?’ In deciding whether a dismissal is fair or unfair, an employment tribunal must not substitute its own view for that of the employer as to whether it was fair to dismiss the employee.
One of the most important practical implications of ‘redundancy’ is that a dismissal by reason of redundancy is prima facie fair. Whether such a dismissal is in fact fair or unfair will then turn on whether the tribunal considers that the employer acted reasonably in treating the redundancy as a sufficient reason for dismissing the employee.
Failure to consult with an employee about to be made redundant will make it likely that a tribunal would decide that any resulting dismissal(s) was unfair.
Consultation must be fair which means that there must be:
- Consultation when the proposals are still at a formative stage
- Adequate information on which to respond
- Adequate time in which to respond
- Conscientious consideration by [the employer] of the response to consultation
A usual tactic from a claimant’s lawyer in an employment tribunal is to show that there was no such meaningful consultation and that the whole process was a ‘fait accompli’.
Information must be provided about alternative roles but the claimant must indicate an interest. Where there are one or more possibilities of suitable alternative employment available to an employee who is to be made redundant, then the employer should normally inform the employee of the financial prospects of those positions to enable the employee to make an informed choice.
A failure to provide such information is likely to make any dismissal unfair and, presumably, likely to render it reasonable for the employee to refuse the offer.
If dismissing 20 employees or more
Since 1 March 1996, employers have been under a statutory duty to consult appropriate representatives of employees about impending redundancies if at least 20 employees are being dismissed at one establishment within a 90-day period. Consultation must begin in good time and in any event, 30 days before the first of the dismissals takes effect or 90 days if 100 or more employees are to be dismissed.
Statutory dismissal procedures
In a redundancy situation, the statutory dismissal procedure requires an employer to tell an employee of the reason for the redundancy, the selection criteria, his score, but not the threshold (ie the ‘break’ score beyond which his job is safe) or the scores of other employees. Failure to provide this information renders the dismissal automatically unfair and leads to an increase in the compensatory award.
In redundancy dismissals, where a matrix system is used, this requires that the employee be told the selection criteria and the scores he has achieved. It does not require that the employee be told the threshold score he must achieve to remain in employment, or the scores of other employees.
The new law, likely to be overturned next year, is complicated and for that reason legal advice should be sought when dealing with redundancies.
Charles Price is a barrister at No.5 Chambers.