Wake-up call – The redundancy process

05 August 2011
Wake-up call – The redundancy process

Making staff redundant can lead to unfair dismissal claims if you don't follow the correct procedure. Legal expert Clare Thomas explains

THE PROBLEM In response to budget cuts, West Midlands Police is making officers redundant - using its right to forcibly retire officers with 30 or more years' service - and then offering them the opportunity to return to policing for free. This raises questions about how a redundancy situation is established and what process must be followed to effect a fair redundancy.

THE LAW Redundancy is a potentially fair reason for dismissal providing there is a genuine redundancy situation, for example, there is a need to reduce the workforce. However, even once a genuine redundancy situation is identified, the process must be carefully handled to avoid a claim for unfair dismissal and also potentially claims for discrimination.

EXPERT ADVICE A genuine redundancy situation involves either a business closure, a workplace closure or a reduced requirement for employees to do work of a particular kind. The starting point is the requirements of the business, which implies this is essentially a commercial judgment on the part of those running the business.

A tribunal will not look behind the employer's decision or require it to justify how or why the diminished requirement has arisen, provided it is genuinely the reason for the dismissal.

Once a genuine redundancy situation is established, it is important to follow a fair process to select those who are potentially at risk of redundancy.

Fair selection
Fair selection involves the fair application of objective selection criteria to a pool of employees. An employer should begin by identifying the pool, which is the group of employees from which it will select those who are to be made redundant.

All employees should be objectively scored against selection criteria. Employers must be careful to ensure that none of the criteria are affected by potentially discriminatory factors. For example, "last in first out" is potentially age discriminatory so should be avoided at least as a primary criteria. Similarly, marking an employee down due to sickness absence resulting from a disability may amount to disability discrimination.

Employer obligations
Once the employees who are at risk of redundancy are identified, the employer must consult with them regarding their selection for potential redundancy. Consultation is by way of individual meetings to which employees must be invited in writing and have the right to be accompanied.

It is important to engage in meaningful consultation with employees, and to invite the employee to put forward alternatives to redundancy.

Employers are also under an obligation to explore what suitable alternative employment may be available within the organisation.

Redundancy confirmation
Provided that the employee selected for potential redundancy still has the lowest score and no alternatives to redundancy have been identified, the redundancy can be confirmed. This is usually done at a further meeting with the employee at which the reasons for the decision are highlighted, the redundancy package is explained and the employee is notified of their right to appeal the decision. The decision must also be confirmed in writing.

Where employment is terminated on grounds of redundancy, employees still receive their notice. Sometimes, they can be required to work their notice and on other occasions, they can be paid in lieu of their notice entitlement. Employees are also entitled to statutory redundancy pay.

If an employee appeals the redundancy, they - along with a companion - must be invited in writing to an appeal meeting. The appeal should, ideally, be conducted by a more senior manager, independent of the process so far. The grounds of appeal should be fully explored before the appeal outcome is communicated to the employee. The appeal decision should be confirmed in writing.

â- Use objective selection criteria and be aware of the risk of discrimination with certain criteria.
â- Consult with employees in a timely manner and in a meaningful way. This will ensure the decision does not appear pre-determined.
â- Consider suitable alternative employment.

BEWARE If you are making 20 or more employees redundant, employers are also required to collectively consult, which involves electing employee representatives. Failure to adhere to collective consultation obligations can lead to an award of up to 90 days' pay in compensation.

Ensure there is no potential discrimination behind an individual's selection for redundancy. Unfair dismissal claims are currently capped at £68,400 plus the basic award, but compensation in discrimination claims is uncapped.

Clare Thomas is a solicitor at Charles Russell

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