Redundancy

Employment Rights Act 1996 Section 139 Redundancy is classed as one of the fair reasons for dismissal According to ERA 1996 section 139 employees are to be regarded as redundant if their dismissal is attributed wholly or mainly to: The fact the employer has ceased, or intends to cease, to carry on the business for the purposes for which the employees were employed The fact that the employer has ceased, or intends to cease, to carry on that business in the place where the employees were so employed, or The fact that the requirement of that business for employees to carry out work of a particular kind in the place where they were so employed, has ceased or diminished or is expected to cease or diminish

Lloyd v Brassey [1969] 2QB98 “a worker of long standing is now recognised as having an accrued right to his job; and his right gains in value with the years. So much so that if the job is shut down he is entitled to compensation for loss of his job … The worker gets a redundancy payment. It is not unemployment pay … Even if he gets another job straight away, he nevertheless is entitled to full redundancy payment. It is, in a real sense, compensation for long service. No man gets it unless he has been employed for at least two years by the employer; and then the amount of it depends solely upon his age and length of service.” Lord Denning

Work of a particular kind There have been different approaches adopted by the courts to determine the meaning of this: Job function test Contract test Statutory test

Job function test Called on the court to consider whether the overall function of the role, rather than the specific work detailed in the employment contract, had changed If the function had remained then any dismissal would not have been on the grounds of redundancy

Job function test North riding garages v Butterwick [1967] 2 QB 56 An employee of 30 years service had worked his way up to workshop manager although he still spent much of his time working as a hands on mechanic. New owners took over and required the workshop manager to concentrate more of his time on sales and paperwork, which he was unable to do satisfactorily After some months he was dismissed and he claimed redundancy Held: He was found to be not redundant, the court stated that employees have a duty to adapt to new methods and techniques. Only if the new methods alter the nature of the work required may they be redundant. His function as workshop manager remained.

Contract test Required the court to consider the range of work an employee could be called upon to perform under their contract – rather than merely the actual work they have been doing If this work has diminished or ceased the employee would be redundant

Contract test Nelson v BBC [1980] ICR 100 The employee was employed as a producer and editor for the BBC He was employed in the Caribbean service, and when this service was closed down the question arose as to whether Mr Nelson was redundant Held: The court of appeal held that although there was a reduction in the specific work Mr Nelson had actually been doing, there was no such reduction in the work of producers and editors generally, which was the work he was contracted to do; thus Mr Nelson was not redundant

Statutory test Introduced by the EAT in the case of Safeway Stores Plc v Burrell [1997] IRLR 200 as follows: Was the employee dismissed? If so was there a diminution or cessation in the requirements of the employer’s business for employees (not the employee) to carry out work of a particular kind, or an expectation of such in the future? If so, was the dismissal of the employee caused wholly or mainly by that state of affairs?

Statutory test The terms of the employee contract are not relevant for consideration at the second stage; they will only become relevant, if at all at the third stage Application of the statutory test allows for the principle of ‘bumping’ Where an employee is made redundant, not because his own job is redundant, but because his job has been filled by another employee who would otherwise themselves have been made redundant

Murray v Foyle meats [1990] ICR 827 Mr Murray was employed as a meat plant operative, working almost exclusively in the company’s slaughter hall, although his contract of employment required him to work in any part of the employer’s operation. Because of a decrease in work, the company required fewer employees in the slaughter hall and a selected number of employees, including Mr Murray, from among those employed in the slaughter hall, for redundancy. Mr Murray argued that, since his contract required him to work in any area of the operation, to select only from those workers actually working in the slaughter hall was unfair, and he complained of unfair dismissal. In effect, he argued that the court should apply the “contract test”, and the company argued that the “function test” should be applied. Held: Both the contract test and the function test “missed the point”. The correct approach was to apply the words of the statute and ask whether the dismissals were attributable to the diminution in work, in this case they were, thus MR Murray was redundant

Place of work The problem faced by the court has been to decide whether the inclusion of a mobility clause in the employee’s contract should be the deciding factor in defining the place of work with reference to redundancy If a purely contractual approach is taken, and the employee’s contract contains a general mobility clause, an employer may avoid a redundancy situation by offering the employee work in any location

High table ltd v horst [1997] irlr 513 Ms Horst had worked for High Table , a catering services company, as a waitress for a number of years at the premises for one of their clients, Hill Samuel, in the city of London. Following a down turn in the business between High Table and Hill Samuel in 1993, Ms Horst was made redundant. She argued that since her employment contract contained an express mobility clause – which purported to allow the employer to transfer staff on a temporary or permanent basis to any location – her place of work was at any of her employer’s clients, and not just at Hill Samuel. She maintained that she could and should have been offered work elsewhere, thus was not redundant, and claimed unfair dismissal.

High table ltd v horst [1997] irlr 513 Held: The court of appeal rejected her argument, coming down in favour of a factual approach, and stating: “if an employee has worked in only one location under his contract of employment … it defies common sense to widen the extent of the place where he was so employed, merely because of the existence of a mobility clause. Of course refusal by the employee to obey a lawful requirement to move may constitute a valid reason for dismissal, but issues of dismissal, redundancy and reasonableness in the actions of the employer should be kept distinct”

Who is eligible? The claimant must be an employee They must have been dismissed And they must have a minimum of two years’ continuous employment on the “relevant date” The relevant date being either the date on which notice expires, or in the case of termination without notice, the date on which termination takes effect It is normally necessary to make a claim within six months of the relevant date In addition certain categories are excluded from redundancy rights such as dismissed for misconduct or industrial action

Procedure In order to ensure that the redundancy may not be held to amount to an unfair dismissal, it is important that the employer should follow a procedure of good industrial practice, such as was laid down in the case of Williams v Compair Maxam Ltd [1982] ICR 156 The employer should give as much warning as possible The employer should consult with the trade union, particularly regarding selection procedure The selection procedure should be objective The employer should ensure that the selection procedure is followed The employer should seek to offer alternative employment

Following should be considered In situations where there is a proposal to make more than 20 people redundant the employer has a statutory duty to consult with the union or other appropriate representatives (s.188 of the TULR(C)A 1992) Note however, that the employer’s duty is to consult, not to agree, with the union – the final decision is the employers Following the introduction of s.98A of the ERA 1996, the failure by an employer to follow an agreed procedure, other than the statutory procedures, will not necessarily make the redundancy dismissal unfair

Following should be considered There is no clear authority on how closely the tribunal may examine the procedure adopted for redundancy selection. The more transparent the system the less likely the tribunal will question it Certain selections for redundancy will be automatically unfair eg pregnancy or trade union activities If an employer makes an offer of suitable alternative employment to an employee before the end of his employment, there are two possible consequences If the employee accepts the offer, then subject to a four week trial period there will be no dismissal; or If the employee unreasonable refuses the offer, he will be barred from claiming a redundancy payment

Suitable alternative employment Taylor v Kent CC [1962] 2 QB 560 A head teacher whose school had merged with another was offered a post as a supply teacher, but at his old salary. The court agreed that his demotion in status was sufficient to make the new position unsuitable. Likewise a drop in pay or earning potential could make a new position unsuitable

Refusal of offer The second issue of the tribunal would be to determine whether a refusal of the offer of alternative employment was unreasonable Here the test would be subjective and the tribunal may take into account such personal factors as health, family commitments etc The test was laid down in Devon Primary Care Trust v Redman [2013] EWCA Civ 1110 “whether this particular employee in this particular situation acted reasonably in refusing the offer of employment”

Compensation Redundancy compensation is calculated as follows: For each year worked under the age of 22, half a weeks gross pay For each year worked over the age of 22 but under the age of 41, one weeks gross pay For each year worked over the age of 41 one and a half weeks pay A maximum of 20 years of employment can be taken into account The statutory maximum amount for the basic calculation of “a weeks pay” is currently £508