Redundancy - Common Mistakes

Common mistakes made by employers

Many redundancies are carried out incorrectly by management, to the point where they amount to unfair dismissal under the Employment Rights Act 1996. If you can identify the errors or weaknesses in your redundancy process, then you can use them to strengthen your redundancy negotiations and to negotiate a better redundancy package.

Is there a genuine redundancy situation?

Under section 98(2)(c) of Employment Rights Act 1996 an employer may fairly dismiss an employee for a reason that relates to the facts that the employee is redundant to the needs of the business. This can happen in the following circumstances:

1. Job Redundancy - Where the business ceases or intends to cease to operate;
2. Place of Work Redundancy - Where the business ceases or intends to cease to operate in the place where an employee was employed;
3. Employee Redundancy - Where the employer no longer needs as many employees;

If none of the above situations exists then the employer will be carrying out a ‘sham’ redundancy, that is to say a genuine redundancy situation does not exist and the employer is attempting to use a fair reason to terminate an employee’s contract. Any dismissal by way of redundancy will be automatically ‘unfair dismissal’.

Is the size of the selection pool for redundancy fair?

An employer will often create a pool of employees from which those to be made redundant will be selected. A common failing by employers when picking the pool is making the pool either to narrow where all relevant employees have not been included or too wide, where employees are included in the pool despite their role not being redundant.

Where the specific job is being made redundant, the employer should ask themselves what is the exact nature of the job to ensure employees who fit the job description are placed in the pool.

Employers will often trip themselves up by selecting employees who may perform similar but nor identical work or employees who provide cover for the redundant role on a ad hoc basis like covering sick or holiday absence.

Is the redundancy selection criteria fair?

To prove a role is genuinely redundant, employers must carry out a fair selection procedure, using transparent, consistent and objective redundancy selection criteria. The selection criteria put in place to choose employees within the pool must be objective, transparent and fairly applied to each candidate.

A common approach is to use relevant information like an employee’s skills, experience, attendance and absence records.

Often if an employer has your card marked a sign may well be scores for what would be considered reasonable criterion but your marks are deliberately low and go against your employment record.

The use of "last in, first out" (LIFO) is likely to put employees in younger age groups at a particular disadvantage, as they are more likely to be the employees with the least service. This would entitle those employees to make claims for indirect age discrimination. The employer might however be able to show that LIFO is a proportionate means of achieving a legitimate aim, for example rewarding loyalty, if it is used as one of several criteria, or to determine the outcome of a selection exercise where employees have scored the same on other criteria.

Discrimination in redundancy

An employee should not be selected out of the redundancy pool because of a protected characteristic such as age, disability or gender. To do so would support a claim for discrimination and unfair dismissal.

Have you been consulted on an individual basis?

It’s not enough just to carry out consultation. If an employer is proposing to make redundancies, then it should inform employees that their jobs are at risk of redundancy as soon as possible.

An employer must act reasonably when treating redundancy as a reason for dismissal. Genuine consultation is an integral part of showing an employer has acted reasonably. Failure to consult an employee will support a claim for unfair dismissal.

Failing to consult properly on collective redundancies

If an employer is proposing to dismiss 20 or more employees at one establishment within a 90-day period then they are required to collectively consult with appropriate representatives about any proposed dismissals. Any consultation should involve: (i) considering ways to avoid the proposed dismissals; (ii) reducing the number of employees to be dismissed and (iii) mitigating the consequences of those dismissals and must be undertaken with a view to reaching agreement with appropriate representatives.

The consultation process is not just a formality and must not be a sham. Any consultation must be meaningful. A failure to do so can result in protective award claims per affected employee.

Selecting for redundancy when roles are similar

Interviewing for redundancy

Numbers at risk of redundancy affect the consultation period

Did your employer consider alternative work for you?

An employer must look for alternative work before giving notice of redundancy otherwise any dismissal will be unfair. The duty on an employer, however, is only to take reasonable steps and not every conceivable and possible step to find alternative employment.

It will be a question for the tribunal as to whether it is reasonable to offer a job in a lower and less well-paid position. It is best practice to make the offer, even if it is not expected that the employee will accept it, rather than having to argue at a tribunal that a reasonable employer would not have made the offer.

Failing to apply the special rules to employees on family leave

If an employee is on maternity leave, adoption leave or shared parental leave and is selected for redundancy, they have additional legal protection. Such an employee who is at risk of redundancy has a right to be automatically offered any suitable alternative employment available and thereby jumping ahead of any other at risk employees in the queue.

Failing to hold a dismissal meeting or providing a right of appeal

A redundancy is a potential fair reason for dismissal. However, a failure to follow a proper procedure may render a dismissal unfair. Any notice of dismissal should only be given once all alternatives to redundancy have been considered and the consultation process is completed.

An employer should hold a meeting with employees at risk of redundancy before making a final decision, and should allow the employee to be accompanied at that meeting. Any decision to dismiss should also be confirmed in writing. It is best practice to ensure that any letter of termination also includes a right to appeal to a more senior manager than the one who carried out the consultation process to ensure the fairness of the process followed.