One quarter of UK employers have drawn up plans to make redundancies over the next 12 months, according to research by the Chartered Institute of Personnel and Development (CIPD) and management consultancy KPMG. With unemployment levels reaching a seven year high it should come as little surprise to read that businesses of all shapes and sizes are increasingly seeking advice on redundancy law. The Forum of Private Business (FPB) has said that 12% of calls to its legal advice helpline regarding employment issues related to redundancy.
Redundancy law has moved on considerably since the last economic downturn and businesses that do not follow current law and practice risk exposing themsleves to expensive claims of unfair dismissal and discrimination.
The compulsory dispute resolution regulations generally apply to all dismissals including redundancies, except where the rules on collective redundancies apply. If you do not follow the minimum 3 step dismissal procedure the redundancy will therefore be automatically unfair, where an employee has the requisite service, and compensation can be increased by up to 50%.
In brief the compulsory dismissal procedure requires:
Step 1: The employer to write to the employee stating the grounds for their proposed redundancy and to invite them to attend a meeting to discuss the situation before a final decision is taken.
Step 2: Meeting.
Step 3: Appeal.
Whenever a redundancy is proposed meaningful consultation must take place, and in order to avoid a negative outcome at the Employment Tribunals there must be documentation that it occured. Two or more meetings will normally be required to allow for meaningful consultation. The meetings should also be used to explore the possibility of alternative employment which is another crucial element that is required to achieve a fair redundancy.
Employees have the right to make a reasonable request to be accompanied by another employee or a trade union official of their choice at the meetings. Companions do not have the right to answer questions put to the employee but can otherwise take an active role during a meeting. Compensation can be awarded where this right is infringed.
In addition to complying with the compulsory dispute resolution procedures an employer must be able to show that it acted reasonably in all the circumstances (including its size and administrative resources). Fair and objective criterion and a consistent approach are key factors. A paper trail that confirms what an employer did is normally crucial to defending a claim.
Where an employee is selected as being potentially redundant, subject to consultation, after the employer has applied its objective criterion to the pool of staff that were at risk, difficult questions often arise about how much information should be disclosed to the employee to explain their selection.
Based on recent case decisions my advice in such situations is:
- Enclose details of the individual's own scores with the Step 1 letter
- Enclose a schedule of the other pool employees' total scores but on an anonymised basis with the Step 1 letter.
This is slightly more cautious than the cases suggest but should provide you with substantial protection and has the benefit of allowing for any scoring mistakes to be picked up during the consultation stage rather than at the Employment Tribunals.
The legal landscape looks set to change on 6 April 2009. The compulsory dispute resolution regulations will probably be abolished that day and be replaced by a new Acas Code of Practice. The draft Acas Code of Practice applies to disciplinary and grievance procedures only and redundancy and fixed term contracts are stated as being beyond its scope. The extent to which Employment Tribunals apply the principles in the current procedures to redundancies from 6 April 2009 remains to be seen but is likely to be significant.
Ray Silverstein is a partner at Browne Jacobson. For more information visit www.brownejacobson.com
