On 1 January 2011 amendments to the Employment (Jersey) Law 2003 creating rights on redundancy take effect. The new provisions mean that for the first time in Jersey there will be statutory redundancy payments for employees similar to those operating in the United Kingdom. This legislative change introduces a degree of complexity to employers which will require careful handling.
What is Redundancy?
It is important to understand what is meant by redundancy. Article 2 of the Employment Law defines redundancy as effectively meaning:
- A cessation of business by the employer
- A cessation of business in the place where the employee worked
- The need for employees to carry out work of a particular kind has ceased or diminished, or
- The need for employees to carry out work of a particular client in a particular place has ceased or diminished.
In applying these grounds the employers' business and any associated businesses are treated as one business. Where care should be taken is to avoid using redundancy as a misnomer for dismissal. The need for an employee to fulfil a role does not cease due to issues of conduct or capability. The role ceases because the role rather than the employee is not required.
Eligibility for a Redundancy Payment
The new law creates an entitlement to a redundancy payment where an employee is dismissed by reason of redundancy. The employee to be entitled to redundancy must have been continually employed for a period of two years and the claim must be made within the required time limits.
For employee to claim redundancy one of the following events has to occur within six months after termination.
- A redundancy payment is agreed;
- The employee gives notice in writing of a claim for a redundancy payment to the employer;
- The employee refers the claim to the Employment Tribunal; or
- The employee makes a claim of unfair dismissal to the Tribunal.
If one of these four events occurs the employee can at any time then present a claim to the Tribunal for a redundancy payment. The Tribunal has a discretion as to whether or not to allow a redundancy payment claim to be made. The longer the delay the greater the risk of such a claim being rejected.
Payment of Redundancy Pay
The employee who is made redundant will be entitled to a week's pay for each year worked for the employer. The amount of this payment may be set by the Minister for Social Security. If no limit is set by the Minister then the amount will be the most recent figure for average weekly earnings published by the States of Jersey. The current figure is £630.
Inter Relationship With Unfair Dismissal
Redundancy should firstly not be used to remove employees where there are issues of conduct or capability. Employers should continue to follow existing procedures to address those issues.
Secondly, employees can claim unfair dismissal after six months but are only eligible for redundancy payment after a period of two years. As the financial consequences of unfair dismissal and redundancy payment are different, there may be arguments for employees engaged for more than six months but less than two years as to whether they are redundant or unfairly dismissed. If they are redundant and the procedure for selecting for redundancy is a fair one then there will be no entitlement or redundancy payment and the dismissal will also be fair.
The amounts of compensation payable for unfair dismissal are different from the amount of any redundancy payment and are greater except for very long serving employees. The Tribunal also has a discretion to reduce a payment for unfair dismissal. A redundancy payment however cannot be reduced. Employers also need to take care in selecting employees for redundancy. An unfair selection will entitle an employee to both the redundancy payment and the right to claim unfair dismissal. The amendments do not consider the inter-relationship between these payments however if UK practice is followed by the Tribunal as is likely, these will not be able to be set off against each other.
The Approach to Selection
In deciding whether employees are to be made redundant the employer firstly needs to consider whether there exists one of the redundancy scenarios required by Article 2.
In dealing with employees the employer must then follow four principles of fairness which should also be considered in situations of redundancy:
- A duty to consult;
- A duty to warn of redundancy;
- A duty to establish fair criteria for selection of employees for redundancy;
- A duty to explore alternatives to redundancy.
In practice this requires:
- Employers to be explicit in warnings of redundancy once the employer from a business perspective considers it likely there will be a redundancy scenario;
- The reasons for selecting an employee for redundancy should be discussed with the employee and the employee given a chance to respond;
- Alternatives to dismissal should have been looked at such as a cut in wages.
There is no age limit on a redundancy payment.
Offering Alternative Employment
An employee will not have a right to redundancy payment where a new offer of employment is made within four weeks of the redundancy taking effect. This rule will not apply however if the terms of employment are not the same and within four weeks after starting the new role either employee or employer gives notice and the main reason for doing so is that the new position is not suitable.
The Tribunal in deciding whether or not to order redundancy payment can take into account whether or not the employee has unreasonably refused an offer of the same or other suitable alternative employment.
Time Off to Look for New Work or Training
Once an employee has been provided with notice of redundancy the employee during the notice period will have rights to take time off to look for alternative positions such as attending interviews or to attend training courses for future employment. The employer is obliged to pay the employees up to 40% of their salary during such absence.
The amendments also bring in two other changes of significance.
Firstly, the right to minimum periods of notice employees are entitled to receive are being altered to create a sliding scale of one week's pay for each complete year of service up to a maximum of twelve weeks. This reduces slightly the current provisions and means that for the first twelve years of employment the amount of any notice pay and redundancy pay will both be a week for each year of service.
Secondly, the upper age limit for unfair dismissal claims is being removed. This is because otherwise employees would have had the right to claim redundancy after 65 but not unfair dismissal. From an employers perspective it is therefore key that any contract of employment contains an express retirement age.
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.