Redundancies and Reorganisations

A genuine redundancy arises where the employer’s requirement for employees ceases or diminishes. This can arise because there is a reduced requirement for employees to perform a particular kind of work or where a business or workplace is closed. The meaning of redundancy is wider when considering collective consultation requirements (see below (Do the collective redundancy consultation requirements apply in relation to changes to terms of employment?)

Without being able to establish that a genuine redundancy arises (see What is redundancy?) a dismissal on this basis is likely to be unfair. A genuine redundancy dismissal can also become an unfair dismissal where an employer fails to adopt a fair process in relation to selecting employees for redundancy, fails to consider alternatives to redundancy or fails to follow a fair procedure in relation to the redundancy.

A fair procedure involves the employer consulting with the employee on an individual basis in relation to the potential redundancy dismissal. A fair procedure may also involve collective consultation with appropriate representatives of affected employees.

Only employees with 2 or more years’ service can claim unfair dismissal. However, irrespective of length of service, employees may make claims to an Employment Tribunal if there is any discriminatory factor in the employer’s decision to dismiss.

Where an employer proposes 20 or more redundancy dismissals, at a single establishment, over a period of 90 days, in addition to ensuring that the redundancy dismissal is fair on an individual basis, the employer must comply with additional requirements to provide information about its proposals and to consult on a collective basis.

The information and consultation obligations are owed to ‘appropriate representatives’ of employees and involve the employer consulting for minimum periods prior to effecting redundancy dismissals. These additional requirements are complex and failure to properly satisfy the requirements can result in financial penalties of up to 90 days’ pay for each affected employee.

There is a defence to such claims where special circumstances apply but this defence is rarely successful.

For the purposes of collective redundancy consultation, appropriate representatives are either a trade union recognised by the employer in relation to the affected employees or where there is no recognised trade union, representatives that have been elected for the purposes of collective consultation in relation to those employees. 

Accordingly, an employer may be required to conduct an election exercise to appoint appropriate representatives prior to being able to commence consultation. There are complex rules in relation to the election of representatives and employers must factor into their timescales complying with these requirements and potentially training representatives in relation to their role.

Where an employee has been furloughed (under the Government’s Coronavirus Job Retention Scheme), the employee is not permitted to perform any work or provide any service to the employee’s employer. However, Government Guidance has confirmed that  employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers while furloughed, provided that they do not provide services to or generate revenue for or on behalf of the employer;

Prior to consultation, employers must provide the appropriate representatives with a written information about its redundancy proposals. The information provided must include, for example, details of the reasons for the proposals, details of the numbers and descriptions of employees affected, details of selection criteria and details of redundancy payments.

Consultation with appropriate representatives must begin ‘in good time’ and must in any event begin:

• where between 20 and 99 redundancies are proposed at one establishment within a 90 day period, at least 30 days before the first of the dismissals takes effect; and
• where 100 or more redundancies are proposed at one establishment within a 90 day period, at least 45 days before the first of the dismissals takes effect.

A dismissal before the minimum consultation period is up will be a breach of the requirements (even if the agreement has been reached with appropriate representatives). 

Consultation involves a genuine and meaningful exchange with appropriate representatives about avoiding dismissals, reducing the numbers to be dismissed and mitigating the consequences of the dismissals, as a minimum.  In order for consultation to be meaningful, the employer’s proposals must be at a formative stage when consultation begins and the representatives must be given sufficient time to make a meaningful contribution.

The collective consultation requirements are in addition to the requirement not to unfairly dismiss an employee.  Employers must therefore undertake (and normally complete) collective consultation prior to effecting individual dismissals (which must follow a fair procedure and individual consultation).

In addition to obligations to inform and collectively consult with appropriate representatives in cases of collective redundancies (20 or more), employers must also notify the Secretary of State of the proposed dismissals. This is done using a prescribed form – Form HR1, which can be obtained from the Redundancy Payments Office. Failure to give notice to the Secretary of State is a criminal offence punishable on summary conviction by an unlimited fine.

The collective consultation requirements apply where an employer proposes to dismiss 20 or more employees where the reason for dismissal is a reason not related to the individual. This means that the requirements are triggered in circumstances where dismissals are for reasons which are wider than what is commonly understood to be redundancy. Such circumstances include where dismissals may be proposed in the context of reorganisation or changes to terms and conditions involving significant numbers of employees.

Employees who have been furloughed under the Government’s Coronavirus Job Retention Scheme (CJRS) can be made redundant but all employment law principles in relation to individual and collective redundancy (including individual and collective consultation requirements continue to apply). Employers will need to consider carefully whether a decision to dismiss by reason of redundancy at such a time is reasonable in all of the circumstances.

It is not clear whether an employer who effects a redundancy during a furlough period can continue to claim the wages rebate under the CJRS in relation to either a period of consultation or notice. Redundancy payments cannot be claimed from the Scheme.

During a furlough period all employment law principles continue to apply, including requirements to effect a fair dismissal and to observe both individual and collective consultation requirements.

On redundancy, employees with 2 or more years’ service are entitled to a statutory redundancy payment (calculated by reference to age, length of service and a weeks’ pay (currently capped at £538)). Employees may also have an entitlement to an enhanced redundancy payment in some circumstances. Leavers must also either work a period of notice or be paid in lieu of notice. An entitlement to pay in lieu of accrued but untaken holiday may also arise.

The Government’s Coronavirus Job Retention Scheme (CJRS) does not cover statutory redundancy payments. It is unclear whether the Scheme covers pay during a notice period. In certain circumstances where an employer is unable to pay a statutory redundancy payment, an employee may claim the payment from the Redundancy Payments Office.