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Redundancies: navigating tricky issues
Employers often view redundancy as a relatively simple way of ending employment. However, redundancy dismissals are often deemed to be unfair because employers have overlooked relatively simple requirements or they have been caught-out by a more tricky issue. This article seeks to help employers to avoid some common pitfalls.
Issue one: having a genuine business case for making redundancies
Having a solid business rationale for making redundancies is imperative. This will be easier if the rationale for the redundancy is clearly set out in contemporaneous documentation, which records the reasons for the proposals to make employees redundant.
It will not always be the case that any dismissal occurring as part of a restructuring or business reorganisation will be regarded as a “redundancy”. Employers should avoid relying on a ‘trumped up’ business case in an attempt to use redundancy to mask another underlying reason for dismissal, such as poor performance, since this will often be uncovered during the disclosure exercise or in witness evidence.
Issue two: pooling and selection criteria
If the employer does not identify an appropriate pool, any dismissals are at risk of being unfair. One of the most common pitfalls is to define the pool too narrowly. As a general rule, all employees doing the same or similar work should be included in the pool.
There are also commercial risks in drawing the pool too widely, as it puts a larger number of employees “at risk”, which makes the selection process more onerous and as more staff are impacted, there is likely to be a greater impact on productivity and staff morale.
Selection criteria must be fair and reasonable. Subjective criteria such as having the right attitude or being the right fit increase the risk of a dismissal being unfair and should be avoided. Some potentially fair selection criteria include performance, disciplinary record, length of service and attendance. It is legitimate for an employer to attach weightings to the different criteria, but the employer must be able to justify them.
Issue three: collective redundancy consultation
Collective redundancy consultation is triggered where an employer is proposing to make 20 or more employees redundant at one establishment within a period of 90 days or less. There are a number of tricky issues with collective redundancies, but three main ones business encounter are:
- Has the employer hit 20 or more dismissals at one establishment in 90 days?
Employers can be caught out if there are not systems in place to identify when the threshold might be triggered. It is also important to know which dismissals to take into account and which can be disregarded when determining whether the threshold has been reached. For example, employees who take up an offer of voluntary redundancy must be counted towards the total number of redundancies. Furthermore, employees whose employment ends on the expiry of a fixed term do not need to be included.
Remember that there are minimum time periods that must be complied with for notifying the government of collective redundancies and the length of time that must elapse between starting collective consultation and the first dismissals taking effect. These minimum time periods vary depending on the number of redundancies proposed. For 20 or more redundancies, the relevant time period is 30 days. For 100 or more redundancies, the relevant time period is extended to 45 days.
- Overlooking individual redundancy consultation
There is a danger of focussing only on collective consultation and forgetting about the importance of conducting individual redundancy consultation with each affected employee. Both are requirements of a fair dismissal process when proposing to make 20 or more redundancies at one establishment within a period of 90 days or less. Therefore, just relying on the collective redundancy consultation process alone will leave employers exposed to claims for unfair dismissal.
Issue four: enhancing redundancy pay v age discrimination risk
Statutory redundancy pay is fairly modest. The maximum for the longest-serving employees is less than £15,000. It is fairly common therefore for employers to offer enhanced redundancy payments, which are usually linked to age and/or length of service. The difficulty here is that these kinds of enhanced redundancy schemes are potentially discriminatory on the ground of age, as they favour older employees.
The statutory redundancy pay formula itself is discriminatory, because it tends to provide higher payments to older workers. However, there is a specific exemption for it in discrimination legislation. This exemption also extends to enhanced redundancy schemes, but only if they are sufficiently similar to the statutory redundancy pay formula.
This means employers need to be wary of adopting an enhanced redundancy scheme that differs from the statutory formula to avoid claims of age discrimination. If not, the employer will only avoid liability if it can prove that the discrimination can be objectively justified.
Issue five: pregnant employees and employees on maternity leave
It can be difficult for employers to handle a redundancy exercise where some of the affected employees are pregnant or on maternity leave, particularly if the employer is to avoid allegations of unfair dismissal and/or sex discrimination. However, remember that it is possible to make a pregnant woman or woman who is on maternity leave redundant provided that:
- a genuinely fair process is followed; and
- the reason for the redundancy is wholly separate from the pregnancy/maternity.
In some circumstances, it is necessary to treat women on maternity leave more favourably than their colleagues in a redundancy process. One example is that employees on maternity leave have an automatic right to be offered any suitable vacancies. This essentially gives women on maternity leave priority over other employees who are also at risk of redundancy.
It is also worth considering whether any adjustments should be made to the consultation process for employees on maternity leave in order for them to properly participate in the consultation process. For example, scheduling meetings further in advance, rearranging the dates and times to allow employees to meet their caring responsibilities and/or speaking by telephone if it is more convenient for the employee are all potentially reasonable adjustments here.