Are you in a redundancy situation?
The impact of coronavirus has brought about an array of dire circumstances for UK businesses. Many have collapsed entirely, and many more have been forced to downsize, leading to countless job losses and national unemployment rates hitting a three-year high (4.5%).
Naturally, this has led to a revived and widespread confusion among many employers as to the legal technicalities of redundancy, and how to navigate the issue. In particular, it can be hard for organisations to establish when redundancy actually applies, and whether it’s a viable decision from a business perspective.
The business case
The first item on the agenda for employees when it comes to redundancy should be to give thorough consideration to the practicality, viability, and necessity of it. This is particularly poignant in 2020 due to the financial hardship caused by COVID-19, but in spite of that, this is a consideration that should always take place.
More specifically, every redundancy situation should start with a plan, and this principle applies now more than ever before. Employers must consider necessity, what alternatives have been considered or implemented, how many redundancies are needed, where will they come from, how people will be selected, and what the timeline is.
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Many of these points may well be flexible and, as part of a proper consultation process, may be liable to change following discussion with employees. That said, it is still vital to start with some kind of plan of what you are trying to achieve and why. In fact, it is common for employment lawyers to ask for copies of the redundancy rationale to make sure the business case is robust, and to grasp an understanding of what the client is trying to achieve.
What’s more, employers must be conscious of the limits of the Tribunal in this scenario, as generally it will not look behind the decision to make redundancies or judge whether or not they were commercially sound. If there is a reduction in the number of employees carrying out a particular kind of work, that is enough. The Tribunal is more concerned about the process, the consultation, the pooling, the selection criteria and the search for alternatives.
From that perspective, the business case is important for your own planning requirements but also to help explain things to your workforce. That said, it is less important on a purely legal basis.
Is there a redundancy situation?
With this being a prevalent issue at the present time, employers must also develop a grasp on the technicalities of what qualifies as a redundancy situation.
Under the Employment Rights Act 1996, there are three such scenarios:
- An employer ceasing to trade (i.e a total closure);
- A site closure; or
- A reduction in the requirement for employees to carry out work of a particular kind.
In order to legitimately issue a redundancy, you must fall into one of those categories, and therefore redundancy cannot be used as an easy way to evade a problem.
Total and temporary closures
The ‘total closure’ scenario is self-explanatory. If a business is due to close completely, then that will amount to a redundancy situation. Here there is no issue about pooling, selection, or alternative employment, as it’s likely everyone will be made redundant.
However, this can include temporary closures too, which is where it gets complicated. A common example of this would be if the site was closed for refurbishment, but in general, it is fact-dependent and works on a case-by-case basis.
When it appears that the employer is replacing one business with another, a Tribunal may have to decide whether the new business is sufficiently different in nature from the original one. If so, the dismissal of the employer’s original employees will be for redundancy. Again, this will come down to a question of fact.
When it comes to a business closure, employers must also be mindful of the Transfer of Undertakings (Protection of Employment) Regulations, also known as TUPE. In the event of a business closure, especially one being instigated as part of a pre-pack administration, TUPE will apply and the workforce will transfer to the new owner rather than being made redundant.
A site or workplace closure is, again, relatively self-explanatory. For instance, if a company owns a series of factories and closes one, then that is likely to be a redundancy situation.
One caveat that often arises is the question of which site the employee actually works at on a contractual level. However, the general consensus is that the Tribunal should largely ignore what the contract says, and instead look at the reality of the situation.
When considering this type of redundancy, the starting point is the requirements of the business. This implies a commercial judgement, on the employer’s part, about the priorities of the business and about which kind of work has become surplus to requirement.
Get redundancy right with Ellis Whittam
From determining whether your organisation is in a genuine redundancy situation to understanding redundancy pay and settlement agreements, we assign named experts who will help you transform complex legislation into a series of manageable steps. Learn more about our redundancy support.
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