In today’s climate with increasing economic pressures, many employers may find themselves having to consider the necessity of redundancies. There are several reasons why redundancies may be needed, including the need to close a site or where the requirement for work of a particular kind has ceased or diminished.
For employers who find themselves considering a redundancy exercise, we have set out a summary below of the legal position when dealing with small-scale redundancies following recent case law.
Small-scale redundancy processes refer to where an employer proposes to dismiss as redundant less than 20 employees at one establishment, within a period of 90 days or less. In these circumstances, the employer’s collective consultation obligations are not triggered and instead the employer can consult with the affected employees individually (employers should note that the ACAS Code of Practice on Disciplinary and Grievance Procedures does not apply to dismissals for redundancy). With a collective consultation process employers have additional statutory obligations.
We should make clear that redundancy processes can vary significantly in complexity and depending on an employer’s situation. It is therefore recommended that employers seek legal advice in advance.
When can an employer consider redundancies?
Section 139 of the Employment Rights Act 1996 provides that an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:
a) the fact that his employer has ceased or intends to cease –
- to carry on the business for the purposes of which the employee was employed by him, or
- to carry on that business in the place where the employee was so employed, or
b) the fact that the requirements of that business –
- for employees to carry out work of a particular kind, or
- for employees to carry out work of a particular kind in the place where the employee was employed by the employer, have ceased or diminished or are expected to cease or diminish.
Conducting individual consultation
The process generally involves first considering the employer’s business case/reason for redundancy, together with who the affected employees will be and placing their roles at risk of redundancy. Where there is more than one affected employee, an employer will need to consider how they will approach the selection process.
Once affected employees have been provisionally selected for redundancy, individual consultation will need to take place. This will include discussing why their position has been provisionally selected for redundancy, the terms on which any redundancy would take place, possibilities for alternative employment within the company and ideas the employees may have for avoiding redundancy. Employers will need to ensure the employee’s representations are taken into account before making any decision.
Further consultation may be required to follow up on outstanding matters e.g. any proposals for alternatives to redundancy or suitable alternative employment.
A final meeting will need to be held to confirm the outcome of the redundancy process, and a right of appeal ought to be offered as best practice. In particular for those who have the statutory minimum service for an unfair dismissal claim.
Employers should maintain a paper trail throughout the consultation process to include minutes of meetings.
Case Law
The 2024 case of De Bank Haycocks v ADP RPO UK Ltd was an unfair dismissal claim presented in the Employment Tribunal (ET).
In this case the Claimant was made redundant following the Claimant scoring the lowest out of the affected employees on a selection matrix. The Claimant was not provided with his matrix scores until after he had been dismissed. An internal appeal hearing was held. The Claimant discovered during his ET claim that the scoring exercise had in fact already taken place before the consultation process had commenced. The ET dismissed the Claimant’s claim for unfair dismissal, finding that whilst he was unaware of his scores until his internal appeal hearing, the employer carried out a ‘conscientious’ appeal process.
The Claimant appealed to the Employment Appeal Tribunal (EAT) based on a failure to consult properly arguing that, effectively, a decision had been made to dismiss him three weeks before consultation had commenced. The EAT found that the Claimant had been unfairly dismissed and allowed his appeal.
The Respondent (employer) subsequently appealed to the Court of Appeal (CofA), who overturned the EAT’s decision and found that the Claimant had not been unfairly dismissed (in line with the original finding of the ET). The Claimant’s further appeal to the UK Supreme Court was unsuccessful.
Key principles
During the EAT hearing, the concept of “workforce consultation” arose. In recent years the Tribunals have scrutinised the level of consultation that is required in redundancy exercises, particularly where there is a pool of only one employee, given the potential for redundancy being used unfairly to remove unwanted employees.
In this case, the EAT found that there had been a clear absence of consultation at the formative stage by the employer.
Notwithstanding that it was improper for an employee to not receive their scores until dismissal, the employer’s conscientious appeal process that considered the Claimant’s scoring formed part of the CofA’s decision to overturn the EAT’s findings.
This case emphasises the importance of employers having a robust internal appeal processes in place and highlights the risk that can be involved if an employee’s scoring is not disclosed at the outset.
What are the takeaways for employers?
- Employers should ensure that redundancy exercises are conducted fairly and transparently from the outset.
- Employees should be consulted regarding the proposed selection pool and selection criteria from the start and before any final decision is made. Creating visibility makes it harder for an employee to allege unfairness down the line. It may also encourage more meaningful engagement from the employee throughout the process.
- Managers responsible for carrying out redundancy processes should have the benefit of appropriate training. Employers may also wish to consider whether they would benefit from a written redundancy policy.
- Lastly, employers should seek legal advice at an early stage to ensure that any redundancy process is conducted fairly and consistently. Employers need to be mindful that any differences in how employees are treated could result in allegations of discrimination if the difference in treatment is believed to be due to a protected characteristic. Employers should also be aware of their obligations when it comes to pregnant employees and those returning from maternity leave, adoption leave or shared parental leave.
Speak to an expert
For more information, contact Imogen Templeman in our employment team on 0345 209 1000 or or send an enquiry.
