The Nuts and Bolts of Redundancy Rob Smith 8 July 2009

Topics for Discussion Redundancy selection criteria and age discrimination. Collective Consultation & The Duty to Inform and consult. Enhanced Redundancy Pay. Statutory Lay off and unlawful deduction from wages. Changes to terms and conditions

Redundancy in a Recession Financial crisis Multiple business failures Mass redundancies a reality but… Obligation to follow a fair procedure

Definition of Redundancy Section 139(1) of the Employment Rights Act cessation of the business or diminution of need for employees to carry out “work of a particular kind.” Murray –v- Foyle Meats – focus on whether work has diminished and if so whether dismissal is attributable to that fall.

Redundancy Selection S.98(4) test of reasonableness focus on: Identifying the pool The criteria for selection Applying the criteria Consultation Alternative employment

The Pool for Selection ET have to determine whether definition of pool is within the range of responses. Thomas & Betts Manufacturing v Harding – employer has applied their mind to issue and acted from genuine motives. Practical difficulties of challenging whether too wide or too narrow.

The Selection Procedure Not rocket science – best if criteria are as objective as possible. If so ET should not subject to close scrutiny. Common criteria include: - Performance skill & knowledge - Absence record - Disciplinary record - Length of service

Contractual Selection Procedures Failure to agree selection criteria not necessarily unfair. But where contractual scheme in place, employer will be expected to stick to it. Central question therefore whether scheme is contractual. Has it been incorporated and is it apt for incorporation c.f. selection issues and entitlement to enhanced redundancy pay. Kaur –v- MG Rover & Albion Automotive –v- Walker & Ors.

Applying the Selection Criteria Williams –v- Compare Maxam Ltd – ET strictly limited not to minutely scrutinise or substitute its decision. Must ensure method not inherently unfair and applied fairly. Managers unlikely to attend ET to explain scores Looking for fundamental flaws in the overall process not a re-scoring exercise.

Consultation Specific obligations in mass redundancies under s.188 TULR(C)A Obligation to follow the statutory 3 step procedure up to 6 April. There after ACAS code of Practice on redundancy. Mugford -v- Midland Bank EAT guidance on obligations re individual consultation.

Consultation Warning that individual at risk Confirmation of basis for selection Opportunity for employee to comment on assessment Consideration of alternative employment Opportunity to appeal

Consultation cont… Timing – consultation must not be too late in the process Collective consultation – Does not remove obligation to consult individual but may limit scope Right to be accompanied remains Appeal no longer statutory right but dangerous not to allow and could cure previous unfairness.

Alternative Employment Consideration of alternative employment is an important part of a fair procedure Size and resources of the employer relevant Employer expected to take reasonable steps not simply to notify but give additional information

Suitability of Alternative Employment S.141 – Unreasonable refusal of suitable alternative employment Test of unreasonableness involves detailed consideration of employees personal circumstances. Hudson –v- George Harrison Trial Periods – mandatory 4 week trial

Compensation & Polkey Repeal of s98A ERA automatic unfair dismissal for failure to follow 3 steps Return of Polkey –v- Dayton Services Procedural unfairness will render dismissal unfair but ET may reduce compensation to reflect chance of dismissal at later date Not applicable where the unfairness is substantive rather than simply procedural

Conclusion Difficult claims to pursue. Need for a realistic approach but a thorough examination of the process adopted. As recession continues union representation more important than ever to mitigate redundancies and ensure rights protected whilst still within the workplace.