UK: New Pitfalls for Employers in the Redundancy Process

Last Updated: 26 April 2005
Article by Sejal Raja

Originally published February 2005

The Employment Act 2002 (Dispute Resolution) Regulations 2004 ("the Regulations") are now in force, and introduced statutory dismissal and disciplinary procedures (DDPs),with which employers and employees must comply. Many employers are still unaware that they apply to redundancies. Sejal Raja explains why this is.

… apply to all types of dismissal

The DDPs apply to all types of dismissal. That includes dismissals on the grounds of redundancy, failure to renew a fixed term contract and on ill health grounds. There is also an argument that they apply on retirement.

How will the DDPs affect dismissals on the grounds of redundancy generally?

The DDPs increase the risk that an employee could claim that what should have been a straightforward redundancy was in fact an unfair dismissal, and demand additional compensation. Redundancy is potentially a fair reason for dismissal, but this does not prevent the redundant employee raising an allegation of unfair dismissal provided he or she has the necessary one year’s service.

In order to defeat such a claim, the employer needs to show not only that the reason for dismissal was redundancy but also that, in the circumstances, it was reasonable to dismiss that particular employee for redundancy and that a fair procedure was followed. Such a procedure will now need to take into account the DDPs.

Initial Warning and Consultation

So how does the traditional recommended redundancy procedure change with DDPs?

There is some academic argument as to whether the initial stages of redundancy do, in fact, fall under the DDPs. One could argue that the announcement of possible redundancies and potential selection for redundancy should be regarded as the same as contemplating dismissal and so the DDPs would apply. On the other hand, the employer may, after discussion, decide that there is no longer a need to undertake or continue with the redundancy process and consequently, the procedures would not apply.

The Regulations are not clear. A prudent approach would be to carry out one-to-one consultation even at this stage.

Although the DDPs apply when an employer is proposing to dismiss an employee on the grounds of redundancy, the Regulations provide that, where an employer will be making more than 20 employees redundant, it will not be required to comply with the DDPs. This is because of the need to carry out collective consultations which will apply even if the number of employees to be made redundant falls below 20.

Consultation and Meeting As was the case under the old law, there should be one to one consultation regarding the possibility of dismissal by reason of redundancy before a final decision is made, so as to allow the employee to put forward reasons or arguments for retaining his or her services in the same or in alternative employment.

The invitation to the meeting now ought to be in writing (previously it could have been oral), setting out the circumstances which might lead the employer to contemplate dismissing the employee on the grounds of redundancy.

Once the written invitation has been sent to the employee, the meeting should be held. This is not a new stage in the procedure as most consultations would take place in the form of a meeting.

Employers should bear in mind the following:

The meeting must take place at the appropriate stage of the procedure.

The timing of the meeting must be reasonable. For example, it would not be reasonable to ask an employee to attend a meeting at 7pm when working hours are 8am to 4pm. Furthermore, employers should bear in mind that meetings should be of sufficient duration to allow both parties to explain their case.

Each step and action under the procedure must be taken without unreasonable delay. It is not clear what is meant by unreasonable delay. No doubt case law will provide guidance in due course.

The employee is required to take all reasonable steps to attend the meeting.

The location of the meeting must be reasonable. Therefore if you have offices in various parts of the country and there are redundancies at the Gloucester branch, it would be unreasonable to have the meeting in London.

The meeting must be conducted in a manner that enables both employer and employee to explain their cases. If the employer makes a decision at the end of the meeting, particularly in a redundancy situation, it helps if he has left the meeting for a time to consider arguments put forward by the employee. If he did not do that, the employee could argue that the employer did not listen to his/her case which would be a breach of the DDPs.

The employee should be offered the right to be accompanied by a Trade Union Representative or a fellow employee.

Alternative employment

This element of the procedure remains unchanged. The employer should make enquiries in the case of any employee who is likely to be made redundant as to the possibility of some other job being available elsewhere in the employer’s organisation.

Appeal

Whereas under the old procedure, a dismissal would not have been unfair simply because of a lack of appeal, it will now be automatically unfair.

The employer should notify the employee of the right to appeal. No time limits have been set out in the Regulations and therefore an employer should stipulate a time limit of say 5-7 days for the employee to appeal. However, if the employee submits an appeal within say 14 days, the safer course would be to hear the appeal until guidance is received from the Employment Tribunal as to what amounts to a reasonable time limit.

Conclusion

The bad news is that the new procedures have created a minefield. The Regulations have not provided any clarity as to how these procedures dovetail with pre-existing practice and therefore we will probably see in the next 2 years, a number of cases doing just that. In the short term, many apparently routine redundancies may expose the employer to a claim by an employee that the dismissal is automatically unfair and result in an increase in compensation of between 10-50%.

© RadcliffesLeBrasseur

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Sejal Raja
 
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