Redundancy: are you getting it right?
Emma Parr looks at best practice for Guernsey employers facing a redundancy situation, including fair selection of employees, consultation, redundancy payments and compromise agreements.
It may not be an issue that an employer wishes to face, but in today's economic climate, redundancy is becoming an increasing reality for some. Embarking on a redundancy procedure can seem like a daunting task, but it does not have to be if you give proper consideration to implementing a fair and reasonable process.
Most large businesses have a formal procedure in place for handling redundancy situations, but not all employers know where to start and can so easily fall foul of what is deemed to be objectively reasonable, giving them an even bigger issue to deal with in the long run.
In Guernsey there is no statutory process which employers must adhere. Following Commerce & Employment's Code of Practice and adopting a step-by-step process can help reduce the risks of getting it wrong.
So, where to begin?
Start by taking stock and ask yourself: ''Is this truly a redundancy situation?"
To dismiss an employee on the grounds of redundancy is a fair reason providing the redundancy is genuine. Have the requirements of your business changed?
Next - consider whether the situation can be avoided. Is there any suitable alternative, such as redeployment? If not, identify those employees who fall within the 'pool' of people facing redundancy and then, through an objective selection process, identify those from the 'pool' that will face redundancy.
Once identified, an employer should embark on a fair and open consultation process to ensure that both parties fully understand the position and all reasonable alternative solutions have been explored before making the final decision. Only then, after all of these steps have been taken, can an employer truly say they have conducted a fair and reasonable redundancy procedure.
Do remember that there are no statutory provisions inGuernseythat require an employer to make a redundancy payment to an employee. In Jersey, however, statutory redundancy pay has recently been introduced.
In Guernsey, unless there is a contractual requirement stipulated in an employee's contract of employment, the employer is not obliged to pay the employee anything. It is, however, common for employers to make voluntary (or 'ex gratia') redundancy payments.
What if it goes wrong?
Although making an employee redundant is a potentially fair reason for dismissing a person, get the procedure wrong and an employer can find themselves facing a complaint to the Employment Tribunal and, if unsuccessful, making an even bigger payment than they had ever envisaged: up to 6 months' gross earnings!
It is, of course, possible to defend complaints but to do so is time-consuming, very expensive and can often generate negative publicity.
This is one of the main reasons for having an employee enter into a compromise agreement once the redundancy has been finalised - an employer may be required to offer a financial pay-out to 'sweeten the deal' but by doing so, the employee waives his/her rights to pursue an employment-related grievance. This saves the employer from risk of a future claim, particularly if he/she suspects the procedure may not have been handled as fair and/or as reasonably as perhaps it could have been.
Even if an employer feels they have done everything 'by the book', it may be sensible to try to enter into a compromise agreement, as employees often bring claims without any real merit, and because legal costs are irrecoverable before the Tribunal, it will cost the employer a significant sum to defend the claim, win or lose.
A final word of warning - if your business is considering making redundancies, please seek professional advice as soon as possible. It is so easy to mis-handle the situation and put your business at risk of a possible claim and exposure to an award of compensation.
Call Collas Crill for appropriate legal advice - we will put you on the right track from the outset!
Enforcement of Jersey Employment Tribunal Awards is clarified
Simon Hurry outlines a recent clarification of the Employment Law by the Jersey Courts where it relates to how islanders who have been awarded compensation by the Jersey Employment Tribunal can enforce that decision if payment is not forthcoming.
Islanders who have been awarded compensation by the Jersey Employment Tribunal now have the assurance that they can personally pursue recovery of their awards in the courts.
An ambiguous provision in the Employment Law meant that until a recent judgment by the Royal Court, people could find that despite winning their case in the Tribunal, the law was unclear as to how the successful party should seek to enforce the Tribunal's decision in the event the losing party failed or refused to pay.
The clarification was given by the Bailiff, Michael Birt, in a judgment handed down recently in the case of Luxicabs Limited v Baal. Mr Birt confirmed that, in making an award, the Tribunal creates a debt between the two parties that can then be enforced by the successful party in the appropriate court.
Collas Crill represented Mary Baal in the Tribunal and the Royal Court. We believe it is important that the Court has confirmed that a successful party is entitled to pursue enforcement of their award and has made the process clearer for those who embark on the Tribunal process and for their legal representatives.
In 2010 Mrs Baal brought proceedings in the Employment Tribunal for unfair dismissal from Luxicabs for alleged gross misconduct. Her claim was successful and she was awarded compensation which Luxicabs then failed to pay. Mrs Baal sued them on the award in the Petty Debts Court which again gave judgment in her favour. Luxicabs then appealed against the judgment to the Royal Court.
In the Royal Court, Luxicabs argued that the Tribunal's decision had been erroneous and unreasonable and that they should have been entitled to re-open its findings before the Petty Debts Court. They also argued that because they had not had a fair trial before the Tribunal they were entitled to a full hearing on the merits before the Petty Debts Court. The Bailiff ruled that these arguments were untenable and dismissed the appeal, meaning that the Petty Debts Court judgment stands. The Bailiff said that the court had no ability to revisit or review the Tribunal's decision.
There was one issue that concerned the Court, which was one of statutory interpretation. One interpretation of the relevant provision of the Employment Law was that proceedings to enforce an award of the Employment Tribunal have to be brought by the Tribunal itself. However, the Court was of the view that this result would be "absurd" and confirmed that the position is that the party with the benefit of a Tribunal award (in practice usually the employee) is entitled to bring a court action to recover the amount due. As a postscript, the Bailiff urged that provision be made at future tribunal hearings for the proceedings to be recorded to ensure that parties who may have an arguable appeal are able to advance that appeal with the benefit of a record of the proceedings.
The judgment also represents a word of caution to a losing party taking a similar approach to an award made against it by the Tribunal because the Bailiff also ordered Luxicabs to pay the costs of the appeal that had been incurred by Mrs Baal.
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.