NEWS: How to advise clients in carrying out a redundancy exercise

Posted On: 28 January 2009

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Redundancy Talk – 27 January 2009

Alice Stobart, Advocate, Murray Stable

The purpose of my talk today is to explore ways of advising clients on how to reduce the workforce in times of economic downturn.

In an ideal world a client would come for advice before deciding on who they want to make redundant.  I appreciate that many of you will have to advise once the deed is done and in that case you will have to make the most of what may be a bad job.

If however your client is sensible and wants to ensure that any redundancy exercise is carried out fairly then I would suggest that the first place to start would be to discuss with them whether there are any options short of redundancy that could be used.

For example it may be possible to agree:
• a variation in working terms and conditions to avoid the need for redundancy
• working shorter hours
• 4 or 3 day week
• Home working
 
But if they do not agree it may be that the employer can impose a variation – in such cases it would be necessary to dismiss the employees and offer re-employment on different terms and conditions.

Transfer employees or offer alternative employment as instead of redundancy
• Exercise a mobility clause in the contract to move an employee to another office but if that is to happen then the employer has to be clear that he intends to invoke the mobility clause rather than apply redundancy procedures.
Home Office v Evans 2008 IRLR 59

• Offer alternative employment (4 week trial period) – if they refuse unreasonably then may not be entitled to redundancy payment

Voluntary Redundancy

It may be that some employees would take voluntary redundancy if it were offered.  The difficulty of course is that your client may then lose some employees they would rather keep. 

Employers also have to guard against voluntary redundancy schemes that are potentially discriminatory.  For example if employees are paid higher severance payments because they have longer service that may be discriminatory if it cannot be justified.

Recent case of McCulloch v ICI [2008] ICR 1334 -
looked at the lawfulness of a severance payment agreement which gave more to members of staff with longer service.  It was conceded by ICI that the scheme was discriminatory on grounds of age but that it was justified.  The EAT held that in order to prove the usual test i.e. that the justification had to be a proportionate means to achieve a legitimate aim there had to be a balancing exercise done by the tribunal to weigh up the needs of the company against the discriminatory effect.  The tribunal had not done this and the EAT held that it could not be assumed that because the scheme achieved certain business objectives that that necessarily justified the very significant differentials in pay.

Redundancy
In some ways a redundancy exercise can be an opportunity to rid an organisation of poorly performing employees which in normal circumstances is always very difficult without following rigorous capability procedures.

In what circumstances can a redundancy take place?:

S139 Employment Rights Act 1996
(1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—
(a) the fact that his employer has ceased or intends to cease—
(i) to carry on the business for the purposes of which the employee was employed by him, or
(ii) to carry on that business in the place where the employee was so employed, or
(b) the fact that the requirements of that business—
(i) for employees to carry out work of a particular kind, or
(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,
have ceased or diminished or are expected to cease or diminish.

(Continued.  For full article please click on link at the top of the page.)