Girlings

Advice Note on Redundancies and Lay Off

This note is intended to provide a basic overview of UK redundancy law. Definition of Redundancy The statutory definition of redundancy (found at section 139 (1) of the Employment i!hts "ct 199# ($E "%)) provides as follows&' (1) 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 (ii) (ii) (b) to carry on the business for the purposes of which the employee was employed by him, or to carry on that business in the place where the employee was so employed, or

the fact that the requirements of that business (i) (ii) for employees to carry out work of a particular kind, or 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. Individual Employee Rights (f an employer proposes to dismiss any member of staff by reason of redundancy who

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has more than two years- continuous service. its minimum obli!ations to the employee are as follows&' edundancy !ay 1. To pay a statutory redundancy payment or any contractual redundancy payment (if relevant). /tatutory redundancy payments are calculated accordin! to a set formula. Employees should receive one wee0-s !ross pay for each complete year of service. The ma1imum wee0ly wa!e which can be ta0en into account for the purpose of this calculation is currently 233,.,,. "ny full year wor0ed by staff who are a!ed 41 and over should be paid at the rate of one and a half times wee0ly salary. The ma1imum number of years of service which can be ta0en into account for the purposes of a redundancy calculation is 5,. edundancy payments (includin! contractual redundancy payments) can be paid free of ta1 sub6ect to a limit of 23,.,,,.

"otice 5. The employee should also be !iven the appropriate period of notice under his contract or. alternatively. his contract can be brou!ht to an end sooner and a payment in lieu made representin! his net remuneration pac0a!e for the une1pired balance of his notice period1. 7rovidin! the employee-s contract does not contain an e1press payment in lieu clause. a payment made in lieu of notice can also. in principle. be made ta1 free sub6ect to the overall limit of 23,.,,, (althou!h due to the uncertainty of the position detailed advice should be ta0en at the time such payments are made).

Unfair Dismissal The 8ualifyin! period of continuous employment necessary to ac8uire the ri!ht not to be unfairly dismissed remains one year. /ection 93 E " provides&' (1) #$n determinin% for the purposes of this !art whether the dismissal of an employee was fair or unfair, it shall be for the employer to show (a) (b) (&) the reason for the dismissal, and that it is .a reason fallin% within sub-section (&)

a reason falls within this sub-section if it (a) (b)

(n the unli0ely event that the applicable notice period has not been a!reed by the parties the common law will imply a reasonable notice period into the contract and in addition there are statutory minimum notice periods laid down in the E ". 9roadly. the statutory scheme provides that an employee is entitled to one wee0-s notice for each completed year of employment sub6ect to a ma1imum of 15 wee0s- notice.
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(c)

is that the employee was redundant ..

(') (here the employer has fulfilled the requirements of subsection (1), the determination of the question whether the dismissal is fair or unfair (havin% re%ard to the reason shown by the employer) (a) depends on whether in the circumstances (includin% the si)e and administrative resources of the employer*s undertakin%) the employer acted reasonably or unreasonably in treatin% it as a sufficient reason for dismissin% the employee, and shall be determined in accordance with equity and the substantial merits of the case.+

(b)

,air !rocedure )ismissals by reason of redundancy can. and often do. !ive rise to unfair dismissal claims. (n a redundancy conte1t. if an employer wishes to minimise the ris0 of a findin! of unfair dismissal a!ainst it. it should follow a consultation procedure before servin! notice of dismissal. "n outline of a typical procedure is described below5&' (a) (b) the employee(s) at ris0 should be warned about the possibility of redundancies as soon as redundancies are proposed. the employer should then consult the employees and:or their trade unions. where relevant. by first providin! information in writin! about the proposed redundancies includin!&' (i) (ii) (iii) (iii) (iv)
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the number of dismissals planned; the reason for the redundancies; the proposed timin!; the $pool for selection% from which the dismissed employees will be chosen; the selection criteria3;

The "cas <ode of 7ractice on )isciplinary and =rievance 7rocedures which came into effect on # "pril 5,,9 does not apply to redundancy dismissals. 3 The selection criteria should be chosen with care to ensure that they are not unduly sub6ective and that they are supported by appropriate definitions and !uidance notes.

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(v) (vi) (vii) (viii) (c)

the provisional score !iven to the employee a!ainst the selection criteria4; possible redeployment opportunities; the redundancy payments the company proposes to pay; and any other relevant issues.

>avin! provided this information the employer should then invite the employee to a consultation meetin! to discuss the proposal. The principal purpose of consultation is to avoid 6ob losses or 0eep them to a minimum. (n addition the employee should be permitted to have his say on issues such as the pool for selection. the selection criteria. scorin! and redeployment. (f redundancies cannot be avoided and dismissals are implemented (accordin! to selection criteria which are transparent. ob6ective and fair) the employer has a duty to consider whether there are any other 6obs within the or!anisation (or related companies) which the dismissed employee mi!ht be able to do. "s a rule of thumb. an employer should allow for at least two consultation meetin!s and a minimum period of fourteen days for the consultation procedure described above to be followed throu!h.

(d)

(e)

"n employee should also have the opportunity to appeal a!ainst his dismissal to a more senior mana!er.

Compensation for Unfair Dismissal -asic .ward Unfair dismissal compensation is calculated in two parts. /uccessful applicants receive a basic award (which is calculated in e1actly the same way as a statutory redundancy payment). Employees who have been dismissed by reason of redundancy and have already received a statutory redundancy payment cannot recover a basic award on top. /ompensatory .ward The compensatory award is #such amount as the tribunal considers 0ust and equitable in all the circumstances havin% re%ard to the loss sustained by the complainant in consequence of the dismissal insofar as that loss is attributable to action taken by the employer+.
Key aspects of a fair procedure in relation to scorin! include havin! an appropriate mana!er perform the scorin!; havin! the scorin! moderated to !uard a!ainst bias. inconsistency or errors; utilisation of > and other records to ensure fair and accurate scorin!; and ensurin! that the scorer fully understands the criteria and !radin! system which he is usin!.
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This award is desi!ned to compensate the employee for the financial loss suffered as a result of the dismissal. This includes loss of earnin!s. loss of frin!e benefits. loss of statutory ri!hts and the costs of see0in! alternative employment. (t does not include in6ury to feelin!s. The si?e of the compensatory award will usually depend upon how 8uic0ly the employee miti!ates his loss by !ettin! another 6ob. The current ma1imum compensatory award is 2#+.3,,. Unfair dismissal claims must be presented within 3 months of the effective date of termination of employment. regnancy and !aternity Leave 7articular rules apply to redundancies which affect staff on maternity leave+ and it is recommended that specific advice should be ta0en if this situation arises. Collective Redundancies The law on collective redundancies is found in <hapter (( of the Trade Union and @abour elations (<onsolidation) "ct 1995. This provides that where an employer is proposin! to dismiss. as redundant. "# or more employees at one establishment within a period of $# days or less. the employer has a duty to consult about its proposals with $appropriate representatives% of the employees concerned. "ppropriate representatives are either (a) trade union representatives if the affected employees are #of a description in respect of which an independent trade union is reco%nised+ or in any other case (b) employee representatives elected by the employees concerned. Ahere scenario (b) applies&' the employer must ma0e such arran!ements as are reasonably practical to ensure that the election is fair; the employer must determine the number of representatives to be elected so that there are sufficient representatives to represent the interests of all the affected employees havin! re!ard to the number and classes of those employees; the employer must determine whether the affected employees should be represented either by representatives of all the affected employees or by representatives of particular classes of those employees; the employer must. before the election. determine the term of office of employee representatives so that it is of sufficient len!th to enable

Under the Baternity and 7arental @eave e!ulations 1999.

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information to be !iven and consultations to be completed; the candidates for election should be affected employees on the date of the election; no affected employee is to be unreasonably e1cluded from standin! for election; all affected employees on the date of the election must be entitled to vote for employee representatives; the employees must be entitled to vote for as many candidates as there are representatives to be elected to represent them or. if there are to be representatives for particular classes of employees. to vote for as many candidates as there are representatives to be elected to represent their particular class of employee; and the election should be conducted. as far as is reasonably practicable. so as to ensure that those votin! do so in secret and that the votes cast are accurately counted.

The consultation must include discussions about ways of&' i. avoidin! the dismissals#; ii. reducin! the number of employees to be dismissed; and iii. miti!atin! the conse8uences of the dismissals and must be underta0en with a view to reachin! a!reement. The consultations must be!in in $!ood time% and in any event. at least %# days before the first redundancy dismissal ta0es effectC. To start the consultation the employer must disclose in writin! to the appropriate representatives&' (i) (ii)
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the reasons for its proposals; the numbers and descriptions of employees whom it is proposed to dismiss as

This includes consultin! with employee reps on the issue of whether redundancies are necessary at all which usually entails a discussion about the business rationale drivin! the employer-s proposal. (n the case of 12 /oal 3inin% 4imited v "13 the E"T (Elias 7) held that there is a duty on employers to consult over the reason for ma0in! redundancies in the first place (in that case. the closure of a mine). C 5unk v 2uhnel says that consultation must be completed before notices are served. This leaves open the possibility that an employer can finish the consultation before the end of the 3, days and serve dismissal notices at that point. thereby usin! up some of the 3, day consultation period for notice. (n other words. if an employer starts the consultation on 1 Bay and has finished it by 54 Bay. it can serve notices of termination on that day so lon! as they do not ta0e effect (i.e. employment does not terminate) until 31 Bay

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redundant; (iii) (iv) (v) the total number of employees of any such description employed by the employer at the establishment in 8uestion; the proposed method of selectin! the employees who may be dismissed; the proposed method of carryin! out the dismissals. with due re!ard to any a!reed procedure. includin! the period over which the dismissals are to ta0e effect; the proposed method of calculatin! the amount of any redundancy payments otherwise than in compliance with a statutory obli!ation.

(vi)

The employee representatives must be allowed access to the affected employees and the employer must allow them to use such accommodation and other facilities as may be appropriate. This will include the use of a telephone and probably the use of an office or some secretarial facilities. Ahere the representative is an employee. he or she must be allowed to ta0e a reasonable amount of time off durin! wor0in! hours to perform his or her functions as representative and must not be treated less favourably because he or she is a representative. Lia&ilities Dailure to consult with the appropriate representatives can lead to an employer bein! ordered to pay each redundant employee a protective award. This can be up to $# day-s salary per employee involved.3 (f an employer proposes to ma0e '## or more employees redundant at one establishment within a period of 9, days or less. it must consult in the manner described above. The consultations must be!in in $!ood time% and in any event. at least $# days before the first redundancy dismissal ta0es effect. (orm )R' (n any case where an employer proposes to ma0e 5, or more employees redundant at one establishment within a period of 9, days. the employer must notify the )epartment of Trade and (ndustry on a prescribed form 0nown as an > 1 at least 3, days before the first dismissal ta0es effect. Ahere an employer proposes to ma0e 1,, or more employees redundant at one establishment within the same period the > 1 must be submitted at least 9, days before the first dismissal ta0es effect. " failure to comply with these re8uirements is a criminal offence punishable by a fine.

(n 6usie adin 4td v 73- 8&99': $ 4 '99 the /ourt of .ppeal said that the purpose of a protective award followin% a failure to inform and consult is to provide a sanction for non compliance and as such the startin% point if the employer fails to consult at all will be a maximum award.
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Lay Off There is no statutory ri!ht to lay off staff without pay. (n order to lay off its staff an employer must have a contractual ri!ht to due so. e1press or implied. " ri!ht will be e1press if it is provided for in the contract of employment or staff handboo0. "n implied ri!ht may arise throu!h custom and practice.9 (f an employer does have the power to lay off staff and it e1ercises that ri!ht. it will be sub6ect to the statutory rules on lay off found in sections 14C to 1+4 E ". These rules are desi!ned to prevent abuse of the power of lay off by employers. They provide that if an employee is laid off (or 0ept on short time wor0in! 1,) for four or more consecutive wee0s. or for si1 or more wee0s in a thirteen wee0 period. he may serve a notice on his employer indicatin! that he intends resi!n and claim redundancy payment. (f an employer receives such a notice and it does not wish to pay a redundancy payment it may serve a counter notice within C days. (f it does so it must state in its counter notice that it reasonably e1pects that the employee shall. within four wee0s. enter on a period of not less than 13 wee0s durin! which he will not be laid off or put on short time wor0in!.

Girlings August "#''

" custom or practice of an employer is only li0ely to become a term of the contract if it is. $reasonable. certain and notorious%. The custom must be followed with such re!ularity that it is le!itimate to infer that the parties followed it out of a sense of le!al obli!ation. 1, "n employee will be on short time wor0in! if. as a result of a drop in the wor0 !iven to him by his employer. he received less than half his normal wee0ly wa!e.
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Appendi*

+he Relevant La, ;oes a redundancy situation exist< )ismissal due to a pure reor!anisation or restructure is not. necessarily. a redundancy dismissal. " reallocation of duties amon! an e1istin! !roup of employees does not !ive rise to a redundancy situation. (f overall the business still re8uires 6ust as much wor0 of the particular 0ind in 8uestion and 6ust as many employees to do it. then there is no redundancy situation. even if individual 6obs disappear as a result. Two 8uestions of fact must be answered. >as the re8uirements of the employer for employees to carry out wor0 or a particular 0ind diminishedE "nd. was the dismissal attributable. wholly or mainly to that state of affairsE 3urray v ,oyle 3eats 4td 81===: $ 4 >?& (ork of a particular kind means the tas0s to be performed. not the other elements which !o to ma0e up the 0ind of 6ob that it is 5ohnson v "ottin%hamshire /ombined !olice .uthority 81=@A: B $C '11. There must be a reduced need for work of a particular kind (bric0layin!). not a reduced need for wor0ers of a particular 0ind (bric0layers). 6hawkat v "ottin%ham /ity Dospital "D6 Crust ("o &) 8&991: $ 4 >>> /.. There will be a redundancy situation if the employer re8uires fewer employees. even if the volume of wor0 to be done remains the same. This mi!ht be the result of mechanisation. or computerisation or increased productivity. 6utton v evlon Everseas /orp. 81=@A: $ 4 1@A "$ /. " reor!anisation may lead to a redundancy or it may not. (n each case it is a 8uestion of whether the statutory definition is satisfied obinson v -ritish $sland .irways 4imited 81=@@: $ 4 '@@ F.C. The authorities su!!est that. while it is possible to read the E " as meanin!. in effect. the requirements of the business for a particular description of employee. That is to say. there is a dismissal by reason of redundancy where the employee is dismissed because the business re8uires fewer driver:mechanics or driver:labourers or fewer plumbers F the 3urphy v Fpsom /olle%e type case. this is misconceived. They say that a reallocation of duties amon! e1istin! employees is not of itself redundancy. even if particular 6obs disappear in the process. 6hawkat F thoracic sur!eon re8uired to become dual s0illed cardio thoracic sur!eon; no reduction in thoracic wor0; no reduction in cardiac wor0; no reduction in the number of employees needed; therefore no redundancy situation 6hawkat.

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Ahere a re'or!anisation was simply a prete1t for !ettin! rid of an employee. it must inevitably follow that the dismissal was unfair. Eakley v Che 4abour !arty 81=BB: $ 4 A'. The fact that an employee has a mobility clause in his contract of employment does not mean that the employee-s 6ob is not redundant when his place of wor0 is closed. This issue was ar!ued out in Di%h Cable 4imited - v- Dorst 81==@: . The main issue in the case was the correct test to be applied& the employers ar!ued for the GfactualG or G!eo!raphicG test. assertin! that the employees were redundant as defined; the employees ar!ued for the HcontractG test. assertin! that they were not redundant because the employer was contractually able to as0 then to wor0 elsewhere. The <ourt of "ppeal plumped for the factual or !eo!raphic test. (t stated that the place where an employee is employed is to be determined by a consideration of all the factual circumstances of each case. (f the employee wor0ed in only one location under the contract of employment that is the place of wor0 even if the contract contains a mobility clause. >owever. the terms of the contract may be relevant where the employeeGs wor0 actually has involved wor0in! at a number of different sites. ,air !rocedure (n a case of redundancy. an employer will not normally act reasonably unless he warns and consults any employees affected or their representative. adopts a fair basis on which to select for redundancy and ta0es such steps as may be reasonable to avoid or minimise redundancy by re'deployment within his own or!anisation. !olkey v .F ;ayton 6ervices 4td 81=BB: (< 145. The re8uirements of selection. consultation and see0in! alternative employment in a redundancy case are fundamental and will be treated as bein! in issue in every redundancy unfair dismissal case. The employer will be e1pected to lead evidence on each of these issues. 4an%ston v /ranfield 1niversity 81==B: $ 4 1C5. e!ard should be had to any customary or a!reed redundancy procedure. Ahere such as arran!ement e1ists. it is li0ely to be difficult for an employer to demonstrate that a dismissal in breach of an a!reed procedure is reasonable under s93(4) E " F ussell v 4ondon -orou%h of Darin%ey 81===:. /onsultation (n ;yke v Dereford G (orcester /ounty /ouncil 81=B=I (< 3,, the E"T stated that the importance of consultation $cannot be overemphasised%. Ahere no consultation about redundancy has ta0en place with the employee (or his trade union) the dismissal will normally be unfair. unless the Employment Tribunal finds that a reasonable employer would have concluded that consultation would be an utterly futile e1ercise in the particular circumstances of the case. (t is a 8uestion of fact for the Employment Tribunal as to whether consultation with the employee was so inade8uate as to render the dismissal unfair. 3u%ford v 3idland -ank plc 81==@: $/ A==.

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The duty to consult applies whatever the scale of the employer-s underta0in!. ;e 7rasse v 6tockwell Cools 4td 81==&: $ 4 &?=. Dailure to consult is not e1cused by the employer-s belief that only one employee is suitable for redundancy and that there is no alternative to dismissal. There may be circumstances 0nown to the employee which mi!ht cause the employer to chan!e his mind. " fair employer will consult with the employee before dismissin! him so that the employer may find out whether the needs of the business can be met in some other way than by dismissal and. if not. what other steps the employer can ta0e to ameliorate the blow to the employee. Unless the employer consults. the employee will have no opportunity to put forward any su!!estions. Deron v /ity 4ink - "ottin%ham 81==A: $ 4 A@&. <onsultation on redundancy must be fair and !enuine and. so far as possible. should be conducted in the way su!!ested by =lidewell @J in v -ritish /oal /orporation and 6ecretary of 6tate for Crade and $ndustry (ex-parte), !rice and Ethers 81==': $ 4 C5. see owell v Dubbard 7roup 6ervices 4td 81==>: $ 4 19+. To be fair and !enuine consultation must&' ta0e place when the employer-s proposals are still at a formative sta!e; the employee must be !iven ade8uate information on which to respond; he must be !iven ade8uate time in which to respond; and involve a conscientious consideration by the employer of the employee-s response to his proposals.

Aarnin! and consultation are part of the same sin!le process of consultation which should be!in when the employee is at ris0. Flkouil v /oney $sland 4td 8&99&: $ 4 1C4. .lternative Fmployment There is a duty to consider offerin! the employee alternative employment within the employin! company. or if the employin! company is a member of a !roup. within that !roup. Hokes 4td v -ear 81=@A: $ 4 A?A. (mplicit in this duty is a responsibility on the employer not simply to loo0. but to !ive careful consideration to the possibility of offerin! the employee another 6ob. That another 6ob would involve a demotion is somethin! primarily for the employee to worry about. .vonmouth /onstruction /ompany 4td v 6hipway 81=@=: $ 4 1'. Fffects of /onsultation on emedy " espondent can ar!ue that compensation payable followin! an unfair redundancy should be reduced to reflect the possibility that an employee would have been dismissed anyway. even if a fair procedure had been followed e.!. see /onstantine v 3c7re%or /ory 4td 8&999: $/ =AB. >owever. an employer is not always entitled to call evidence to attempt to show that compensation should be reduced because it was li0ely that the employee would have been dismissed in any event. Ahere the unfairness was $substantive% and went to $the
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heart of the matter% a Tribunal may be 6ustified in refusin! to allow evidence as to whether the unfair act or omission $made a difference% because to do otherwise would be to $embar0 upon a sea of speculation%. 2in% and Ethers v Faton 4td "o. & 81==B: $ 4 ?B?. /ee also Celelift (12) 4td v /herrin%ton 8&99&: .ll F (;) &=? (5an).

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