11 October 2006
Redundancies and the law
Surrey-based Hart Brown solicitors is advising employers and employees to check procedures and their rights before agreeing redundancies.
Claire Taylor, Employment Lawyer at Hart Brown, says: “Often someone is made redundant ‘out of the blue’ and an employer tries to soften the blow by offering a “generous” redundancy package and a promise to provide a good reference. But unless the law on redundancy has been followed carefully, an employee may find they have a case for unfair dismissal.”
If you are an employer, you may be exposing your business to real risk if you deal with dismissals by labelling them redundancies.
The term “redundancy” has a very specific meaning in law. A redundancy arises where an employer is ceasing or intending to cease to carry out the business for which employees are employed in the place where they are employed. Alternatively, redundancy can arise where the need for employees to carry out work of a particular kind (at their place of work) has ceased or diminished or is expected to cease or diminish.
If a true redundancy exists then the dismissal may be fair. However, if the “redundancy” is only a label and not the real reason for dismissal then the employee may be able to make a claim to an Employment Tribunal that the job has been lost unfairly.
Redundancy is a complex issue. It is no longer a question of “last in, first out” although that may sometimes apply. Even if the reason for dismissal is correct the procedure undertaken by the employer to reach the decision to dismiss must be operated fairly.
An employer cannot make employees redundant ‘out of the blue’. There must be prior notification of the possibility of a redundancy. An employer must meet with those affected and give employees an opportunity to make representations against dismissal. A right of appeal must be given to those actually dismissed.
Special rules apply when there are business transfers. Staff changes are often expected in these situations but the law is not that straightforward. The law protects employees where there is a “transfer of undertaking”. It may be an informal requirement of a purchaser on a business sale that certain employees are “made redundant”. This would be unlawful, giving employees a right to claim compensation for unfair dismissal.
Although rare, a claim can even be made for reinstatement to the job or re-engagement in the business. There is a similar obligation upon employers to consult with employees who may be affected by a business transfer. The consultation period depends upon the number of people affected by changes in the workforce and in the business.
If an employer fails to meet procedural requirements in respect of redundancies or business transfers, Employment Tribunals can say the dismissal was unfair. Tribunals have increasing powers to award compensation for the failure to consult or adopt a fair procedure. This is in addition to compensation for the dismissal itself.
Most employees have a right to receive a written reason for their dismissal. Employers should treat such requests with caution. An employer may become bound by the reason given, despite the reality of a situation. If the reason given is wrong (for instance out of a misguided sense of fair play, an employer might disguise a misconduct dismissal with a redundancy label), the employer may not be allowed to later seek to justify the dismissal on some other basis. This can be a costly mistake.
Employers are becoming increasingly aware of their obligations but these can be seen as a barrier to the smooth and efficient running of a business. Instead of becoming embroiled in lengthy procedures an employer may try to buy off claims by offering apparently favourable financial packages to employees. These packages will usually be offered in return for signing what is known as a “compromise agreement”.
The compromise is that the employer will pay more than the strict legal entitlement in return for an employee signing away rights to pursue claims through Employment Tribunals and the Courts. Compromise agreements are only effective if properly entered into.
An employer considering redundancies or a business reorganisation should therefore seek early specialist legal advice to help navigate the legal minefield governing these highly commercial decisions.
It is equally important for an employee to obtain legal advice from specialist employment solicitors, to investigate the circumstances in which dismissal has arisen. Advice can be given on whether or not the dismissal is fair or unfair and on whether the money being offered under a compromise agreement is adequate. Sometimes it is possible to ensure that payments are made in a more tax-efficient way.
It is vital to obtain legal advice promptly. Employers may put deadlines on offers. There are also very strict time limits within which claims can be brought before an Employment Tribunal. Employees will almost invariably lose the right to make a claim if it is not made “in time”.
Hart Brown can offer you specialist employment advice on issues arising from redundancies and any other form of dismissal. It has a specialist employment team looking for practical solutions to legal problems. If you do find yourself in circumstances where you need advice on dismissals, whether for redundancy or otherwise, whether as employer or employee, contact either Jo Pennycook or Claire Taylor at Hart Brown on 01483 887766.
For further information about Hart Brown call 01483 887766.