When an employer faces having to dismiss employees by reason of redundancy, there are certain procedures that should be followed in order to comply with the relevant law.
Redundancy is a potentially fair reason for dismissal, but it may be found to be unfair – for example if a particular employee is unfairly selected for redundancy. Where the decision to make someone redundant follows the reasonable application of a fair process, however, it will not normally be open to question.
When selecting employees for redundancy, employers should, wherever possible, try to use objective criteria that are precisely defined and capable of being applied in an independent way.
In an ideal world, the business’s written procedures will contain details of agreed redundancy selection criteria to be used in such circumstances. Where this is the case, the employer should follow the established procedure unless there is a very good reason for not doing so.
Proper consultation is the key to a fair process. Where there is a recognised trade union, the employer will consult the union, before any action is taken, as to the best way to achieve the desired result. This will include agreeing the criteria to be applied in selecting the employees to be made redundant. When the selection has been made, the employer will again consult with the union to confirm that decisions have been made in accordance with those criteria. Where there is no recognised trade union, it is best practice to agree with managers, employees and their representatives, in advance of the redundancy process, the criteria to be used at each stage. There should also be an appeals procedure which is clearly communicated to the employees concerned.
Once ways to minimise or avoid compulsory redundancies have been exhausted, the next step is to define the pool of employees from which redundancies will be made.
Defining the Pool of Employees
In dealing with unfair dismissal claims that challenge the fairness of an employer’s decisions with regard to the composition of the redundancy selection pool, an Employment Tribunal will ask whether the employer acted reasonably in selecting those particular employees taking into account the actual position at the time of redundancy.
Although specific jobs may be being lost, the pool should not be confined to those currently occupying those jobs but should include all employees capable of doing that work – i.e. those undertaking the same or similar roles. This will normally include employees carrying out the same kind of jobs in other parts of the business and those who work a different shift pattern. In some cases, it will also include those working at other sites. This will depend on the terms of the employees’ contracts of employment and their past working patterns.
Limiting the chosen pool to employees on part-time or fixed-term contracts may be potentially discriminatory if more women than men are employed on such terms.
There is no need to select a pool or undertake a formal redundancy selection process when the entire business is shutting down and there are no other sites to take into consideration. There will also be cases where the redundant post is unique and it is therefore reasonable for the employer to focus on a single employee without developing, or even considering the development of, a redundancy pool.
The law recognises that different people can quite legitimately have different views as to what is or is not a fair response to a particular situation. Employers do, therefore, have a broad measure of flexibility in determining the selection pool for redundancy. Merely identifying factors an employer has not taken into account will not of itself justify the conclusion that the decision reached was unreasonable. Any such finding must be based on a ‘sound rationale’.
Selecting From the Pool of Employees
The following criteria can be used when selecting employees for redundancy:
- Skills and experience;
- Attendance and disciplinary records;
- Standard of work performance; and
- Aptitude for work.
Care must be taken at every step to ensure that the chosen criteria are assessed objectively and applied fairly and consistently. The assessment should be carried out by someone with direct knowledge of the employees’ work and written records of the process kept.
Be careful of using terms that are hard to quantify and therefore more likely to be subjective. For example, assessing employees according to their ‘flexibility’ could discriminate against disabled employees or women relying on childcare arrangements to enable them to work. Likewise, care must be taken to avoid claims of disability discrimination when assessing sickness absence or performance.
‘Performance’ data should be supported by (at least) annual performance appraisals to ensure that any assessment made is based on objective evidence.
For a dismissal to be fair, it is necessary that an employee can be provided with sufficient information in order to be able to challenge his or her selection for redundancy.
In the past, employers have sometimes adopted a ‘last in, first out’ approach. However, this could mean that only young people are selected for redundancy, which would lay the employer open to a claim for age discrimination.
The criteria used should be appropriate in the circumstances and this will often depend on the size of the business. There is no requirement that they can only be valid if they can be scored or assessed in a ‘box-ticking’ exercise. The criteria are bound to involve a degree of judgment, but this does not mean that they cannot be assessed in an objective way.
It is important to select criteria that will help maintain a workforce that can best support the future needs of the business, so making sure the necessary skills and experience are retained is crucial. As the reduction in work which causes the redundancy dismissals need not relate to the actual work carried out by the dismissed employees, there may be occasions when an employee whose job is redundant ‘bumps’ another employee out of their job and the latter is made redundant instead. This most often happens when a more senior employee is willing to accept a more junior role in order to avoid redundancy.
Employers are reminded that where an employer is proposing to dismiss as redundant 20 or more employees within a period of 90 days or less, specific procedures for handling collective redundancies come into play.
Pregnant Employees and Those on Maternity Leave
Selecting a woman for redundancy because of her pregnancy, maternity leave or a related reason is automatically unfair dismissal as well as being unlawful discrimination. Failure to consult a woman on maternity leave about possible redundancy is likely to be unlawful discrimination.
Regulation 10 of the Maternity and Parental Leave etc. Regulations 1999 entitles a woman on maternity leave whose job comes to an end by reason of redundancy to be offered alternative employment with her employer, before her existing contract ends, where there is a suitable vacancy. The new contract must be for work appropriate for the employee and on terms and conditions that are not substantially less favourable than if she had continued to be employed under her previous contract. An employer's failure to comply with Regulation 10 renders any subsequent dismissal automatically unfair under the Employment Rights Act 1996.
The Advisory, Conciliation and Arbitration Service (ACAS), in partnership with the Equality and Human Rights Commission, has published guidance, 'Managing redundancy for pregnant employees or those on maternity leave', to help employers understand the rights of women who are pregnant or on maternity leave when workplace redundancies are necessary.
The manner in which the redundancy process is conducted is important. To avoid problems, contact us for advice before you take any action.