Being made redundant can be a traumatic event. It can be even more traumatic if the person has not worked for their employer for at least two years, because they cannot then claim redundancy pay.
In this article, a solicitor from Thompsons Employment Rights Unit in Belfast, summarises the law on unfair dismissal and redundancy and answers some basic questions that members are likely to ask.
Can you claim unfair dismissal?
As redundancy may be a fair reason for dismissal, an employee who has been made redundant (including someone on a fixed-term contract) can only win an unfair dismissal claim if they can establish that:
- there was no genuine redundancy situation
- the employee has been selected for an unlawful reason
- the selection procedure was itself unfair
- the selection procedure, while fair, was applied unfairly
- the employer failed to comply with the disputes resolution procedure
- the employer did not properly consult with the union and/or the employee
- the employer failed to consider suitable alternative work or did not allow the employee enough information to enable them to decide whether to take an alternative job offered
- the employer acted unreasonably in some other way.
What constitutes a redundancy?
There will be a genuine redundancy situation if the person is dismissed because the business as a whole, or the particular workplace where the employee worked, has closed down. Likewise, if there has been a reduction in the size of the workforce needed to do work of a particular kind.
It can be difficult, however, for employees to challenge their employer when they say there is a redundancy situation. This is because, when a business closes or the number of employees is reduced, employers only have to show that their decision was genuinely based on commercial considerations.
When is it automatically unfair?
Any dismissal will be automatically unfair if the employee can show they were selected for redundancy for a number of specified reasons which include:
- trade union membership
- acting as an employee representative
- taking part in industrial action
- reasons related to health and safety rights; working time rights; minimum wage rights
- assertion of a statutory right.
Similarly, selection may also be unlawful if is directly or indirectly discriminatory. So, for example, a redundancy dismissal may constitute unlawful disability discrimination if a criterion in relation to sickness or attendance is not subject to "reasonable adjustments" in relation to a disabled employee.
And selecting someone because they work part time is likely to be unlawful, either because it constitutes indirect sex discrimination, or because it is contrary to the Part Time Workers (Prevention of Less Favourable Treatment) Regulations.
Any policy of selecting fixed term workers for redundancy may also be unlawful under regulations protecting fixed term workers. However, if they have been brought in to complete a specific task that ends, or to cover a peak in demand, an employer may be able to objectively justify selecting them.
How can the selection procedure be challenged?
Even though redundancy is a fair reason for dismissal, an employee may still be able to bring a claim for unfair dismissal if the employer acts unreasonably in terms of the selection procedure they adopt. The selection criteria used must be non-discriminatory and objective.
For instance, a scheme that relied entirely on the opinion of a manager without reference to any objective measurements of performance would be likely to be unfair. Likewise, if the employer does not stick to a contractual selection scheme.
Was it applied unfairly?
Even if the procedure is considered to be fair, a redundancy may still be unfair if the selection procedure is applied unfairly. For instance, if an employee with a record of positive appraisals is given a low score for performance.
However, other than such clear cut situations, the law is very unfavourable to employees pursuing these claims. It is also very difficult to win them because tribunals are reluctant to interfere with the way employers exercise their discretion.
Did they follow the disputes resolution procedure?
Under the disputes resolution procedure, any dismissal because of redundancy will be automatically unfair if the employer does not comply with the requirements of the statutory dismissal and disciplinary procedures (DDP). The only exception is when the employer has to collectively consult with the relevant union/s.
Even if the employer complies with the basic DDP requirements, they still have to make sure there were no substantial defects in the dismissal procedure. So a redundancy dismissal may be found to be unfair if, for example, the employee was not given an opportunity to put their case as to why their selection was unfair.
Do they have to consult collectively?
When 20 or more people are made redundant within a 90 day period, the employer has a statutory duty to consult with the relevant unions.
Although a failure to consult would not, of itself, make a dismissal unfair, the tribunal would take that fact into account in considering whether the employer acted reasonably.
Do they have to consult individually?
Just because an employer has consulted collectively does not relieve them of the obligation to consult on an individual basis.
If the employer does not consult with the individual (for instance, about their assessment under the selection criteria and possible redeployment), that does not guarantee a finding of unfair dismissal. However, the tribunal will take that into account in deciding whether the employer acted reasonably overall.
Do they have to find alternative work for you?
The simple answer is no, but the employer does have to take reasonable steps to find alternative work for an employee threatened with redundancy. This includes providing specific information about alternative posts, rather than just notifying them of suitable vacancies.
But if an employee does not accept an offer of "suitable alternative employment", they may lose their right to a redundancy payment. They are, however, allowed a four-week trial period in the new post if the terms of employment, including function or location, are significantly different from the old one.
What compensation is available?
Compensation for redundancy is assessed in the same way as any unfair dismissal case. In other words, an individual receives a basic award based on age (soon to be changed due to age discrimination provisions) and length of service; and a compensatory award based on actual financial loss.
In calculating the compensatory award, the amount by which the redundancy payment exceeds the statutory redundancy payment is treated as an "exgratia payment" and is deducted from any financial loss. If the dismissal is automatically unfair, because the employer has not complied with the requirements of the statutory dismissal and disciplinary procedures, the basic award will usually be subject to a minimum of four weeks' pay and the compensatory award will usually be increased by between 10 and 50 per cent.