In recent times redundancies have been an unavoidable reality for many companies. However, now more than ever, tribunals and courts are scrutinising the actions of employers who claim that the dismissal of an employee was due to redundancy and the issue has become one of the most problematic and significant in employment law.
In the two cases in question, Mackey v Resource Support Services Limited (UD56/2009) and Fennell v Resource Facilities Support Limited (UD57/2009), both claimants held managerial roles - regional manager and area manager respectively - and they were made redundant as part of their employer's restructuring. The tribunal held that while both were genuine redundancies, the employer did not adopt fair procedures in effecting the redundancies.
In particular, the tribunal was critical of the fact that the employer:
- Failed to consult or engage with the claimants before
announcing the decision to restructure,
- Failed to properly consult with the claimants on the procedures
that it adopted,
- Did not afford the claimants a reasonable opportunity to
consider these procedures, and
- Did not inform the claimants of their right to appeal the decision.
Redundancy: What the Law Says.
If an employee is dismissed as a result of redundancy, the dismissal will not be unfair if the employer can establish that:
- A genuine redundancy situation exists,
- There was fair selection of the employees for redundancy,
and
- The employer's conduct is fair and reasonable.
If the employer does not observe one or more of these conditions, there is a strong likelihood that the redundancy will be successfully challenged. Most challenges are brought before the tribunal under the Unfair Dismissals Acts, 1977-2007. The tribunal can direct re-engagement, reinstatement or compensation of up to two years' remuneration.
Recent decisions by the tribunal also indicate that in the current economic climate, where it is more difficult for employees to secure work elsewhere, an employer is expected to go to greater lengths than ever before to satisfy the tribunal that its conduct was reasonable. Many unfair dismissal cases are lost because the employer cannot establish that it adopted a fair procedure in implementing a genuine redundancy.
One of the difficulties with the redundancy legislation is that there is no definition of what constitutes fairness or 'reasonable' conduct on the part of the employer. However, many of the tribunal's decisions have focused on the necessity to consult with employees and it is now very clear that an employer who does not engage in some form of discussion with an employee in advance of the decision to dismiss, or who fails to consider if there are any options other than redundancy, will be in a difficult position if that termination is challenged.
Lessons from Recent Case Law
The tribunal's decision in these cases highlights the importance of appropriate consultation with all employees as part of a redundancy process. At a minimum, employers need to:
- Engage with employees and provide information at an early
opportunity,
- Explore all alternatives to any dismissal, to include placing
the employee on reduced hours, short-time, lay-off or implementing
pay reductions,
- Consider redeployment or any alternative employment that might
be available within the organisation and discuss this with the
employee,
- Consider any proposals put forward by the employee concerned.
The consultation process with the employee should be real and meaningful and if there is a new position available, the employee should be allowed to apply for that alternative role. It is also important to note that the concept of 'reasonableness' is a flexible one and what might be considered to be unreasonable in a large profitable organisation in good times may be reasonable in a smaller organisation struggling in a difficult economic climate. Both of the above cases are currently under appeal to the Circuit Court.
LK Shields Solicitors is one of the leading law firms in Ireland. Founded in 1988, today we number some 23 Partners, 70+ fee earners and 130 staff. Our principal areas of practice include corporate, litigation and dispute resolution, commercial property, intellectual property and technology, financial services, employment, pensions and employee benefits.
© LK Shields Solicitors, 2010. All rights reserved.
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.
