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HARD TIMES - UNDERSTANDING THE RIGHTS AND OBLIGATIONS REGARDING REDUNDANCIES AND LAY-OFFS

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Recent headlines portray a picture of doom and gloom of actual and potential redundancies and lay-offs throughout many sectors of British industry. These issues are also complicated by the uncertainty about the current Brexit situation.

What is the statutory definition of Redundancy?

"An employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to -
(a) the fact that his employer has ceased or intends to cease -
(i) 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 -
(i) 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."
(Section 139(1), ERA 1996.)

Broadly, this means there are three sets of circumstances:

  • Complete Business closure (closure of the business altogether).
  • Workplace closure or relocation which could be one of many sites/establishments (closure of one of several sites, or relocation to a new site).
  • Diminished requirements of the business for employees to do work of a particular kind.

Dismissal under such circumstances would be by reason of redundancy.

The common examples of when redundancies arise:

  • Economic pressures forcing reduction in staff;
  • Other pressures such as currently, BREXIT;
  • Changes in production or services; 
  • Restructuring/reorganisation for efficiency purposes;
  • Introduction of new technology;
  • Relocation
  • Outsourcing

Freedom for employers to run their businesses

The law provides employers with considerable latitude in the way it runs its business. As such, an employer is not obliged to justify its reason for making redundancies, provided that the reason for redundancies is genuine and not for any other reasons. Disingenuous reasons for a redundancy may result in claims of unfair dismissal, as long as the employee has the requisite qualifying service of 2 years.

Obligations of an employer to inform and consult

Duty to inform and consult with employees about collective redundancy dismissals. Consulting with the recognised trade unions and staff associations does not preclude individual consultation. Both must be carried out concurrently.

Where an employer proposes to make redundancies of 20 or more employees the within consultation period of 90 days or less, an employer has a statutory obligation to consult, in a meaningful manner, with representatives of the employees at risk of a redundancy. BEIS must also be notified, section 188 of Trade Union and Labour Relations (Consolidation) Act 1992(TULRCA).

During the consultation process there should a moratorium on the proposed dismissals. The minimum period of consultation must be complied with, upon the commencement of the consultation process. There is a penalty for employers for non-compliance, i.e. a "protective award" of up to 90 days' gross actual pay, for each affected employee.

What are the prescribed consultation periods?

Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect. For fewer than 100 redundancies, the minimum period which must elapse is 30 days. The concept of non-compliance is highlighted in the case of Woolworths when it went into administration in November 2008.

The Woolworths case – non-compliance of s. 188 and what amounts to an “establishment”

Awards were made for failure to inform and consult staff apart from where fewer than 20 employees were employed. It was held that each store was a separate "establishment". Consequently, the duty to inform and consult had been engaged in respect of stores with fewer than 20 employees and those employees were entitled to a protective award. As such, a single site, will be treated as being at one "establishment".

Selection criteria

The selection for redundancies must be fair, with an objective criteria. The selection must not be discriminatory. For example, selecting someone with a disability rather along the lines of the criteria.

Is it a Redundancy or a Re-organisation?

It for the courts to determine as to what amounts to a diminished requirement for employees, a redundancy, and each case will be decided on the facts. Examples of circumstances where it is a re-organisation:

  • Change in shift pattern
  • Change in method of work 
  • Part-time v full-time work

Effect of a mobility clause on the place of work

An employee may be asked to relocate if there is a mobility clause in their contract of employment, instead of being made redundant. Failure to take this contractual instruction, of relocating, may result in the employee’s fair dismissal. As such, there would no entitlement to redundancy pay.

In the absence of a contractual clause to this effect, and the employer still insists that an employee relocates, amounts to a fundamental breach of contract, which may give rise to a claim of constructive dismissal.

Indirect discrimination

Where a policy disadvantages a group, with a protected characteristic, under the Equality Act 2010, it may amount to indirect discrimination, unless it can be objectively justified, s. 19 Equality Act 2010, unless it can be objectively justified. For example, where a woman with childcare responsibilities is compelled to relocate to an unreasonable distance, then there may be a challenge on these grounds.

Suitable alternative employment

Failure by an employer, or its associate(s), to consider and make a reasonable search for alternative employment as an alternative to redundancy, may amount of an unfair dismissal. There is a trial period for the alternative employment.

If the employee declines the offer which is suitable, then there is a risk that the redundancy pay may be refused.

Note that the offer of alternative employment must be made before the end of the employee's contract.

Special protection

Women on maternity leave, or men and women on shared parental leave, have an automatic right to be offered a suitable vacancy.

Temporary Lay-offs and short-time working, s. 139(6)

Being put on a shorter working week entitles an employee to redundancy pay if the period has been:

  • 4 weeks in a row
  • 6 weeks in a 13-week period

This means that an employee is entitled to full pay, unless the contract of employment contracts out of this entitlement. If the employee is unpaid, they are entitled to statutory guarantee pay.

The process to follow by an employee in such circumstances:

I. Write to the employer to claim redundancy within 4 weeks of the last day of the lay-off or short-time period.

II. The employer has 7 days to accept your claim or give you a written counter-notice.

III. If the employer fails to comply with (ii) there is an assumption that the redundancy claim has been accepted. doesn’t give you counter-notice, you can assume they’ve accepted your redundancy claim.

IV. The purpose of the counter-notice is to alert the employee that work will soon be available - it must start within 4 weeks and must last at least 13 weeks.

V. For the entitlement to redundancy pay, the employee is obliged to resign. Critically, the employee must hand in the notice within the 3 weeks, starting from:

  • 7 days after the employee gave written notice to the employer (if a counter-notice is not received)
    the date the employer withdrew the counter-notice.
  • An employee is entitled to take on another job while being laid off or on short-time working, unless there is a contractual clause to state that the employee cannot take up another job.

Job Seeker’s allowance is permitted while on lay-off or short-time. The usual rules apply.

TRANSFER OF UNDERTAKINGS (TUPE) MATTERS

Where there is outsourcing or a business transfer, the provisions of the Acquired Rights Directive (Directive 2001/23/EC) may apply. This means that the employees automatically transfer to the external supplier or the new business.

SETTLEMENT AGREEMENTS

If you feel you have been unfairly dismissed, or discriminated against during the selection process or otherwise, we can help you reach an amicable agreement. This may be a preferred option rather than an expensive and lengthy litigation process (only as a last resort).

RASHMI CHOPRA
Consultant Solicitor

If you are an employer or an employee and would like to know more about any of the topics discussed above, please feel free to contact Rashmi Chopra at This email address is being protected from spambots. You need JavaScript enabled to view it.

CALL US 02078411099

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