In this article, Kathy Daniels, Employment Law Author and Lecturer, looks at the process of managing redundancies in a legally compliant way.

Unfortunately, redundancies remain part of business life. It is important to ensure that your approach to managing redundancies is legally compliant, so in this feature we will take the opportunity to review some of the areas where problems most commonly occur.

The importance of collective consultation

If 20–99 jobs are to be made redundant at an establishment in a 90-day period, there should be a minimum consultation period of 30 days. If 100+ jobs are to be made redundant at an establishment in a 90-day period, there should be a minimum consultation period of 45 days.

That has been the law for some time now, but is an area where organisations still make some mistakes.

Some organisations seem to presume that there are circumstances in which it will be acceptable to skip the consultation. In April 2016, 374 employees who lost their jobs when Tullis Russell Papermakers went into administration were awarded a total of £1.5 million due to a lack of consultation. In March 2016, former SSI steelworkers were awarded a total of £6.25 million due to a lack of consultation.

If the consultation is not carried out, or if it is inadequate, employees can be awarded a protective award. A protective award is up to 90 days’ pay, although the employment tribunal can award a lesser amount.

It is essential to consult with employees, even if it seems that the consultation will make no difference. It is also essential to start consultation when the plans are still at a formative stage. Coming to the employee representatives with plans for redundancy that are complete would not be consultation.

Be clear about the place of work

When explaining the collective consultation rules it should be noted that there is reference to there being a specified number of jobs being made redundant at an “establishment” in a 90-day period.

There was considerable debate about the definition of an “establishment” in the case of USDAW v Ethel Austin [2015]. The question was whether each store of the Woolworths chain should be treated as a separate establishment when it went into administration, or whether Woolworths as a whole was the establishment.

The ruling from the Court of Justice of the European Union was that an establishment is the entity to which the employee is assigned to work. So, in the case of Woolworths, it was the individual store that each employee worked at.

If you do have more than one location, it is important to get this right. If you have a redundancy situation, the length of collective consultation will be determined by calculating the number of redundancies at the individual establishments.

The importance of considering suitable alternative employment

Once an individual employee is placed under notice of redundancy, the employer has a duty to consider whether there is any suitable alternative work that the employee could do. If there is suitable alternative employment, the employee is entitled to a four-week trial period in that role. If it is then decided that the work is not suitable the employee returns to being under notice of redundancy.

Note:

There is no requirement to place any agency workers in the company in a job ahead of those who are under notice of redundancy. In Coles v Ministry of Defence [2015], Coles was an agency worker who applied for a permanent job in the company. The job was filled by an existing employee who was under notice of redundancy. Coles was unsuccessful in arguing that the Agency Workers Regulations 2010 meant that he should have priority over other employees when applying for alternative work. There is a right for an agency worker to be made aware of vacancies, but there is no right to receive an interview or to be given a permanent job.

It is important to remember that any woman who is at risk of redundancy, who is pregnant or on maternity leave, does have priority over others who are facing redundancy when consideration is given to suitable alternative employment. If she can do the job she must be offered it, even if there is another employee who could potentially do it better.

The selection process must be free of discrimination

If there is more than one person doing a job that is to be made redundant there will have to be a selection process which identifies who, of a number of people doing the job, should be selected for redundancy. The process of selection should be as objective as possible, and it is usual to put together a selection matrix for this purpose.

The matrix is likely to include a number of different features against which the employees doing the job are assessed. The employee with the lowest score is then selected for redundancy. However, although this might seem like a straightforward approach, it is essential to ensure that it is free of discrimination.

In particular, think carefully when including days of absence as a criteria. Do not include days relating to a disability as defined under the Equality Act 2010, and do not penalise an employee who has taken time off due to maternity or pregnancy-related issues.

If one is going to use length of service, this must only be one of a number of criteria and should not be heavily weighted to avoid accusations of age discrimination.

Also, be sure that you do not over-compensate in your attempts to avoid discrimination. In DeBelin v Eversheds [2011], there were two employees in a selection pool, a man and a woman. The woman was on maternity leave. One assessment criterion was related to performance in gathering in payments. As the woman had been on maternity leave during the assessment period she was given full marks for this criterion. The man was selected for redundancy because he scored 0.5 points less overall than the woman.

The man was successful in arguing that this was sex discrimination. The employer had tried to ensure that the woman did not suffer less favourable treatment due to maternity leave but, in doing so, had treated the man less favourably. The focus should be on equal treatment, not on over-compensating for any perceived disadvantage.

Last reviewed 27 June 2016