As of 6 April this year, the statutory dispute resolution procedures were repealed by the Employment Act 2008. This means that where an employer fails to follow a fair procedure when carrying out a dismissal, it will no longer be deemed automatically unfair. The ACAS Code of practice on Disciplinary and Grievance Procedures replaces the statutory procedures and will be taken into account by employment tribunals when considering procedural fairness of a dismissal. However, the code specifically excludes redundancy situations.
Acas has produced an advisory booklet entitled ‘redundancy handling’ to provide guidance to employers making redundancies after 6 April 2009. The purpose of the booklet offers advice “on how best to handle redundancies” and is intended “to act as an aid to improved employment relations”. It is not clear to what extent tribunals will choose to rely on this Acas guidance if at all because to date there is little case law in which the tribunals have dealt with redundancies under the new regime.
Redundancy before 6 April 2009
Under the old regime, an employer intending to make fewer than 20 employees redundant had to follow the three step statutory procedures. The procedures existed as a minimum requirement for employers to follow and operated alongside the Employment Rights Act 1996 (“ERA”) section 98. Where an employer failed to follow the statutory procedures, the dismissal would be deemed automatically unfair.
Not all redundancy procedures taking place after 6 April 2009 should be dealt with under the new regime. The transitional provisions mean that the statutory procedures will continue to apply to redundancy procedures that occur on or after 6 April where the employer has dismissed the employee on or before 5 April or the employee has submitted a written grievance before that date.
Redundancy after 6 April 2009
Section 98 ERA sets out what a tribunal must consider when deciding whether a dismissal is fair. This includes considering whether the employer has acted reasonably in all the circumstances in treating the redundancy as a sufficient reason for dismissing the employee. The tribunal must take into account the size of the employer’s undertaking and administrative resources. Since the repeal of the statutory procedures, it is necessary for tribunals to look at case law pre-2004 to determine whether a redundancy is to be considered fair.
The leading case dealing with redundancy dismissals prior to the disciplinary procedures is Polkey v AE Dayton Services Ltd. In this case it was held that the employer will not normally act reasonably unless he warns and consults any employees affected, adopts a fair basis to select for redundancy and takes such steps as may be reasonable to avoid or minimise the redundancy by redeployment within his own organisation. The Acas guidance on redundancies repeats these fundamental elements necessary to make the procedure a fair one and deals with each in turn:
Employers are under an obligation to consult with individuals, this is irrespective of the size of the company or length of service of the employee. The employer must inform the employee of the potential redundancy situation and conduct a full and effective consultation as soon as reasonably practicable and in any event when the proposals are still at a formative stage. The Acas guidance states that the consultation should take place at an early enough stage to allow further discussion as to whether the proposed redundancies are necessary and in any event prior to any public announcement. The consultation must be approached with the aim of avoiding redundancies where possible and the employee should be provided with adequate information and time to respond.
Where an employer intends to make less than 20 people redundant at one establishment within a period of 90 days or less, there are strict minimum consultation requirements set out in section 188(1) of the Trade Union and Labour Relations (Consolidation) Act. These requirements have not changed following the repeal of the statutory procedures and this article does not consider the scope of these in any detail. Briefly, the employer must consult all persons who are appropriate representatives of any of the employees who may be affected by the redundancies or any measures connected with the redundancies.
2. Selection Criteria
When selecting employees for redundancy, the Acas guidance states that the employer should use “as far as possible, objective criteria defined and capable of being applied in an independent way” to choose between the employees in the identified selection pool. The application of the criteria should be supported and verified by detailed records and, ideally, more than one assessor should be involved. Employers should take special care to ensure that the criteria identified are not discriminatory and do not have a disparate effect on certain categories of employees such as female employees or older employees. Employers should be aware that the discrimination can be indirect or overt, for example, the selection of part-timers in preference to full-timers could be discriminatory if a high proportion of women are affected. Examples of selection criteria suggested in the guidance include skills or experience, standard of work performance or aptitude for work and attendance or disciplinary record. Employers should give employees an opportunity to challenge the results of the selection and complain if they feel the selection criteria have been unfairly applied in their case.
In addition, the Acas guidance also suggests considering non-compulsory selection criteria including voluntary redundancy or early retirement.
3. Assistance in finding other work
An employer should consider alternative employment for employees being selected for redundancy. Reasonable steps should be taken to seek alternative work and provide support for employees seeking alternative employment. Where an employer is undertaking a redundancy exercise the employer must search for and, if available, offer suitable alternative employment within its organisation. The search for alternative employment should extend, if possible and appropriate, throughout the group of which the company forms a part. As has been the case for some time, the employee should be given a trial period of four weeks in an alternative job where the provisions of the new contract differ from the original contract. Employers should also allow employees who are under notice of redundancy time off to look for new work or for necessary training and provide any additional assistance to enable them to find alternative employment and the financial implications of taking up alternative employment.
Best practice for dealing with Redundancies
Once an employer has established that a genuine redundancy situation exists, it is advisable that they follow the guidance set out by Acas to ensure that a fair process is followed. Employers may benefit from the fact that a failure by the employer to comply with the procedures will no longer automatically entitle the employee to a claim for unfair dismissal. In addition, employees will no longer be able to gain an automatic three month extension for bringing a tribunal claim and there will be no adjustment in compensation awarded for failure to follow the procedure. However, the obligations are still onerous and the employer must should do all they can to reduce the impact of the redundancies.
Aron Pope is an employment lawyer and Senior Associate at City law firm Fox Williams LLP. For more information, Aron can be contacted on 020 7614 2640 or firstname.lastname@example.org.