Recently, many employers have been considering restructuring their business, particularly in light of the global pandemic and various ways of working. Not all organisational change will result in a redundancy situation, however each case will turn on the circumstances and specific facts. We will explore the considerations when undertaking a fair redundancy process.
Restructuring can cover a vast range of situations, including changes to a company’s structure, business model or processes. It can be similar to a redundancy process in that it may involve a reduction in work of a particular kind being required.
There has been case law to suggest that a reorganisation may or may not end in redundancy; it is largely going to depend on the nature and effect of the reorganisation (Robinson v British Island Airways Ltd).
If a company is undergoing a restructuring or redundancy process, it is important that it acts in good faith. A restructure can involve the redistribution of work among the same number of employees, where redundancies may not need to be made. If a redundancy situation arises, employers need to act fairly. In a legal sense, this will involve demonstrating that there was a genuine redundancy situation and that it acted reasonably in dismissing the employee.
When is a redundancy considered to be genuine?
For redundancies to be genuine, the dismissal must meet the legal definition of a redundancy, and this must be the real reason for the employee’s exit from the company i.e. not a sham.
A redundancy situation will arise in three situations:
- Business closure (closure of the business altogether).
- Workplace closure (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.
A redundancy could be viewed as not being genuine if the employer is deliberately seeking to remove an individual from the business for other reasons, such as a ‘personality clash’ or if there is a risk of discrimination – in this situation, it could be a sham redundancy.
Acting reasonably in dismissing for redundancy
Once an employer has shown that there was a genuine redundancy situation, the next question will be whether the employer acted reasonably in dismissing the employee for redundancy. This largely involves looking at the process the employer followed and, specifically, whether the employee was warned about the potential redundancy and consulted on this. In addition if there was a fair basis for selection was adopted and if alternatives to redundancy were considered, including any suitable alternative roles that the employee may be able to undertake.
There are different rules for collective redundancy situations which employers must follow. These will apply where an employer is proposing to dismiss 20 or more employees within a 90 day period at the same establishment, which employers will also need to follow.
When dealing with redundancy pools and selection criteria, employers need to ensure the pool used is appropriate. There are no fixed rules of how the pool should be defined, and therefore, an employer has a large degree of discretion here, however the employer must genuine apply its mind to the appropriate pool and it is always a good idea for it to make a note of its reasoning so that it can demonstrate its thought process here.
As well as a reasonable selection pool, employers should decide upon a fair and consistent basis upon which they will select for potential redundancy. The selection criteria should be objective. Potentially fair selection criteria could include:
- Performance at work and ability
- Length of service
- Attendance records
- Disciplinary records.
Employers should exercise caution when considering length of service as a factor. Younger employees will generally have a shorter length of service and using this as a factor may give rise to potential claims for age discrimination. Similarly, in relation to attendance and disciplinary records, employers should discount any pregnancy and maternity or disability-related absences.
The consultation process is crucial. It is the often the opportunity the employee must input into the process. Prior to undertaking consultations with employees, and as a starting point, we would suggest that employers take the following steps as a minimum:
- Decide which managers will be involved in the process, ensure they are familiar with the law/correct process and check they will be available for the announcements/consultation meetings and to support employees as necessary.
- Consider appropriate pools and selection criteria, if applicable, and what records could be used to assist with the scoring process.
- Ensure there are mechanisms in place to contact absent staff (e.g. those on long term sickness, family leave etc) who are impacted as they will need to be included and kept informed of the process.
- Obtain an updated vacancy list (if you have general vacancy list across the business) so that alternative roles can be shared and considered with those at risk during the process.
- Consider union arrangements and adhere to these. If this is a collective redundancy process, there will be rules on consulting with appropriate representatives for an employer to follow. However, even if this is not a collective process, an employer may have arrangements in place with a trade union (or other body) regarding redundancies and it should consider these in advance