How to undertake a fair redundancy

Restructuring can cover a vast range of situations, including changes to a company’s structure, business model or processes. It can be similar to a redundancy process in that it may involve a reduction in work of a particular kind being required.

Recently, many employers have been considering restructuring their business, particularly in light of the global pandemic and various ways of working. Not all organisational change will result in a redundancy situation, however each case will turn on the circumstances and specific facts. Melanie Pimenta, Senior Solicitor at Clarkslegal explores the considerations when undertaking a fair redundancy process.

Transcript

Melanie Pimenta  0:03  
Hi, I'm Melanie Pimenta, and I'm a senior solicitor in the employment team at Clarkslegal recently, many employers have been considering restructuring their business, particularly in light of the global pandemic and various ways of working, including having to reduce their number of staff and or premises, not all organisational change will result in a redundancy situation. However, each case will turn on circumstances specific facts. So, today, we will be exploring the considerations when undertaking a fair redundancy process. So, restructuring can cover a vast range of situations including changes to a company structure, business model or processes. It may be similar to a redundancy process in that it will involve a reduction of work of a particular kind being required. In addition, there has been case law to suggest that a reorganisation may or may not end in redundancy, it is largely going to depend on the nature and effect of the reorganisation and that's shown in the case of Robinson against British Ireland Airways Limited. So, if a company is undergoing a restructuring or redundancy process, it is important that it acts in good faith. A restructure can involve the redistribution of work among the same number of employees where redundancies may not need to be made. If a redundancy situation arises, employers need to act fairly in a legal sense, this will involve demonstrating that there was a genuine redundancy situation and that is acted reasonably in dismissing the employee. So next, when is a redundancy considered to be genuine? Well, for redundancies to be genuine the dismissal must meet the legal definition of a redundancy and this must be the real reason for the employees exit from the company. For example, not for a sham and redundancy situation will arise in three situations. So firstly, this can be down to business closure, the closure of the business altogether. Next, it could be a workplace closures. So that could involve a closure of one or several sites or relocation to a new site. And finally, diminished requirements of the business for employees to do work of a particular kind. So, this is the reduction of employees and their particular roles. A redundancy could be viewed as not being genuine, if the employer is deliberately seeking to remove an individual from the business for other reasons, such as a personality clash, or if there is a risk of discrimination. In this situation, it could be deemed to be a sham redundancy. So what would be the next consideration fine this? Well, once an employer has shown that there was a genuine redundancy situation. The next question will be whether the employer acted reasonably in dismissing the employee for redundancy. This largely involves looking at the process the employer followed, and specifically whether the employee was warned about a potential redundancy and consulted on this, whether a fair basis for selection was adopted, and whether alternatives to redundancy were considered including any suitable alternative roles that the employee may be able to undertake. So there are different rules for collective redundancies situations which employers must follow. These will apply where an employer is proposing to dismiss 20 or more employees within a 90 day period at the same establishment, which employees will also need to follow. So next, when dealing with redundancy pools and selection criteria, employees need to ensure that the pool used is appropriate. There are no fixed rules of how the pool should be defined, and therefore an employer has a large degree of discretion here. However, the employer must genuinely apply its mind to the appropriate pool, and it is always a good idea for it to make a note of its reasoning so it can demonstrate its thought process here. As well as a reasonable selection pool. Employers should decide upon a fair and consistent basis upon which they will select for potential redundancy. The selection criteria should be objective. Potentially fair selection criteria could include performance at work and ability, length of service, attendance records, and also discipline Three records, I would say here in particular, employee should exercise caution when considering length of service as a factor. And this is because younger employees will generally have a shorter length of service. And using this as a factor may give rise to potential claims for age discrimination. Similarly, in relation to attendance and disciplinary records, employers should discount any pregnancy and maternity or disability related absences. So following on from this, the consultation process is crucial, it is often the point and the opportunity the employee has to input in the process. So prior to undertaking consultations with the employees, and as a starting point, we would suggest that employers take the following steps as a minimum. So firstly, decide which managers should be involved in the process, ensure they are familiar with the law and correct process. And check they will be available for the announcements, consultation meetings and to support the employees as necessary. And it's really important and it's helpful here to have that consistent approach throughout. Next, you should also consider appropriate pools and selection criteria if applicable, and what records could be used to assist with the scoring process. Next, you should ensure if there are any mechanisms in place to contact absent staff. So, for example, those are long term sickness, family leave and aspects like that, who are impacted, as they too will also need to be included and kept informed of the process obtain an updated vacancy list particularly if you have a general vacancy list across the business. So that alternative roles can be shared and considered with those at risk during the process. And also to consider our union arrangements and ensuring that you adhere to these. So if there is a collective redundancy process, there will be rules and consulting with appropriate representatives for employee to follow. However, even if there isn't a collective process, an employer may have arrangements in place where the trade union or other body regarding redundancies, and it should consider these in advance. In addition, the consultation itself must be meaningful, and so should happen at a formula ative stage and the employer must continue to have an open mind throughout. It's quite a can be quite fluid process, for example, so you could have roles and vacancies that pop up at different stages. So it's important that both the employer and the employee just keep reset reassessing their position and seeing if there are any roles that become available. It's important to know that during consultations, redundancy should be presented as a possibility only to avoid the claim that the decision had already been made. And any alternatives to redundancy or suitable alternative roles should be discussed with the employee, and they should be given full opportunity to comment on these. So overall, the process can be very difficult to navigate, and can have huge reputational issues as well as legal ones. I mean, just look at the recent P and o ferries in that situation. So our lawyers are on hand to provide more practical tips and advice to help you guide you through the process. Please do not hesitate to contact a member of our team via email at contact at clarkslegal.com Thank you for watching this video.