The past few months have seen significant upheaval both across
the financial markets and politically. The uncertainty has led some
businesses to consider relocating to elsewhere in the EU (such as
Frankfurt) and many others have ceased hiring as a result of the
broader uncertainty in the market.
A role will be redundant if there is: (i) a business closure;
(ii) a workplace closure; or (iii) a reduced need for a particular
kind of work. So, if a company is relocating and an employee does
not want to move, that individual will potentially be redundant.
Redundancies will also arise if a drop off in work means that fewer
employees are needed in a business.
If the employment contract contains a reasonable relocation
clause however, there may be an obligation for the employee to
relocate. Overseas relocations are usually by choice, not
Employees with two years' qualifying service are protected
from being unfairly dismissed. They can still be dismissed but only
if: (i) one of the five statutory fair reasons applies (which
includes redundancy); and (ii) their employer follows a fair
Redundancy is one of the most 'employer friendly' areas
of law. However, there are several things that employees who face
redundancy should be alive to:
Being a 'good leaver'
Many employees in financial services receive deferred
remuneration such as cash or equity, which will vest over a period
of years under LTIPs or other schemes. There is no default position
as to what happens to this deferred remuneration when an employee
is made redundant; it will be governed by the plans of the relevant
scheme. Most plans will have some mechanism for allowing certain
individuals (often called 'Good Leavers') to keep their
unvested remuneration but who is deemed a 'Good Leaver'
will vary. Favourable leaver status may be negotiable and is worth
exploring on an exit.
At a minimum, anyone being made redundant must be given notice
or paid in lieu of the notice period in their contract. Anyone with
two years' service will also qualify for statutory redundancy
pay (which is a fairly nominal sum). However, many larger employers
may offer enhanced redundancy payments based on 2-4 weeks' pay
for each complete year of service (which are usually contingent on
signing a settlement agreement).
settlement agreement is an agreement in which an employee
agrees to waive their potential employment claims against their
employer. In a redundancy situation, employers will often ask
employees to sign a settlement agreement to draw a line under any
liability for the company going forward. However, just because an
individual is presented with a settlement agreement, it does not
necessarily mean they should sign it. The sums on offer may be
significantly less than the value of their potential claims (such
as unfair dismissal compensation) so legal advice should always be
If an employee's right to work in the UK/EU is contingent on
a continuing employment relationship with a particular employer, a
redundancy situation can become even more stressful. However, non
UK nationals may be able to apply for residency in the UK. It is
generally helpful to think about a contingency plan sooner rather
than later (see our article on immigration status for some helpful
There is no default presumption that redundant employees will be
entitled to their bonus. The status of any bonus payment will be
governed by the employment contract or another agreement, most of
which will contain provisions limiting bonus payments to employees
who are in employment and not under notice at the time of
termination (which would exclude redundant employees). However,
depending on the drafting of this clause, the employee may be able
to argue that they should receive a pro rated bonus or full bonus
for the year.
Unfair dismissal is not the only claim that may arise in a
redundancy situation and the picture on deferred remuneration and
bonuses is just as important. Ultimately, where the financial
climate is poor, redundancies can fairly be made and there may be
no claim that arises from it. However, it helps to have a clear
understanding of the process and to understand if there are any
pressure points to maximise any legal leverage.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In SSE Generation Limited v Hochtief Solutions AG and another decided on 21st December 2016, the Court of Session in Scotland considered a contractor's potential design liability under the NEC Form of Contract.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).