UK: Redundancy Costs Likely to Rise?

Last Updated: 31 March 2005
Article by James Libson and Joanna Blackburn

This month we report on a recent case from the European Court of Justice (ECJ), which has potentially far-reaching, and costly, consequences for the way in which large-scale redundancy programmes are carried out. We also take a look at the consultation launched this month by the Government on draft TUPE regulations and review two of the first cases reported under the new legislation prohibiting discrimination on the grounds of religion or belief.

Collective redundancies affected by ECJ decision

The ECJ has recently handed down its decision in the case of Junk v Kuhnel. The key issue decided by the ECJ related to the point in time at which redundancies could be said to be "effected". Although the case itself focused on the timing of notification of large-scale redundancies to the relevant authorities (in the UK, the Department for Trade and Industry), the decision is likely to be of wider application.

Under the legislation on collective redundancies, employers must begin consultation with appropriate representatives of the affected employees at least 30 days (where it proposes to dismiss 20 or more employees as redundant) or 90 days (where it proposes to dismiss 100 or more employees as redundant) before the first dismissal "takes effect". Previously, it was thought that dismissals take effect at the time of termination of employment and that as a result notice could be served to run simultaneously with the latter part of the consultation period. This enabled employers to carry out redundancies more quickly and/or to keep payments in lieu of notice to a minimum. However, the ECJ held in Junk that redundancies are effected when the employer gives the employees notice. If the ECJ's interpretation is applied to the consultation obligations, employers will be required to complete the 30 or 90 day consultation period before notice can be served. The likely outcome of this decision is to prolong redundancy programmes and make them more costly for employers.

TUPE news

There have been two pieces of TUPE news this month.

Firstly, new regulations on the treatment of occupational pensions on TUPE transfers have been approved by Parliament and are coming into force on 6 April 2005. Currently, occupational pension schemes are specifically excluded from a TUPE transfer. However, from next month, employees who are members of an occupational pension scheme before the transfer of the business, will be entitled to have a scheme provided by their new employer. There is no obligation on the new employer to match the type or value of the scheme from which the employees previously benefited, though the new law does set out certain minimum requirements. The amendments are likely to increase costs for some employers but will offer employees increased protection on business transfers. However, from employees' point of view, given that there is considerable discretion for the new employer in deciding how generous a scheme to provide, such protection maybe limited.

Secondly, the Department for Trade and Industry has issued draft TUPE regulations for final consultation, which will amend the Transfer of Undertakings (Protection of Employment) Regulations 1981. After four years of consultation, the draft regulations are doing the final round before they are expected to come into force on 1 October 2005. Changes will include:

  • a comprehensive coverage of the provisions relating to the contracting-out of services and similar situations;
  • clarification of certain issues relating to transfer-related dismissals and changes to employees' terms and conditions;
  • a new requirement on the old employer to provide the new employer with details of the transferring employees and the rights and liabilities in relation to those employees; and
  • greater flexibility in some cases involving insolvency.

The changes are expected to provide a welcome clarification of some of the more problematical areas arising out of the current legislation.

Religious and sexual orientation discrimination

In one of the first successful religious discrimination cases, an employment tribunal has decided that a practising Christian employee had been indirectly discriminated against, by being required to work on a Sunday. The employee, a residential social worker, had informed her employer that as a practicing Christian attending church she was unable to work on Sundays. However,

a few months after her employment started, her employer changed the work rota which meant that the employee would be required to work some shifts on a Sunday.

The employee resigned and claimed that she had been discriminated against on the ground of her religion. The Tribunal found that by imposing a permanent rota change requiring the employee to work on Sunday, the employer applied a provision, criteria or practice which, although applied equally to all staff, put the employee, as a practicing Christian, at a particular disadvantage. This had entitled the employee to resign and the Tribunal concluded that the employer had indirectly discriminated against her.

In another case, decided shortly after the case above, a tribunal upheld a complaint by an employee who had been dismissed after taking extended leave to make a pilgrimage to Mecca, and awarded compensation for unfair dismissal and religious discrimination.

These two cases are interesting because they illustrate how the new discrimination laws can apply and the need for employers to consider requests to accommodate religious needs seriously, to avoid falling foul of the law.

This article is only intended as a general statement and no action should be taken in reliance on it without specific legal advice.

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