The current economic climate has brought redundancies and the furlough scheme to the forefront for many employers and employees. Unfortunately some businesses simply won’t be in a position to keep all staff on once the furlough scheme ends.
The redundancy process can be difficult for both parties and it is therefore important to consider all legal aspects during the process, including potential discrimination issues, to ensure it is undertaken with the minimum distress to the employees and the business. Whilst redundancy is a potentially fair reason for dismissal, it is mandatory that a fair procedure is undertaken or it could result in a legitimate claim for unfair dismissal.
Employees must have at least two years’ service on the date of termination to bring a general unfair dismissal claim. However, there are a number of unfair dismissal claims where an employee does not need to have any minimum qualifying period of service, such as where the dismissal is deemed automatically unfair. Examples of this include dismissal for health and safety reasons, as a result of whistleblowing, or on the grounds of a protected characteristic (see our page on Discrimination ) Please speak to our experts for further details on when these exemptions may apply.
Redundancy may occur where:
- There is a business closure (the closures of the business altogether)
- A workplace disclosure (the closure of one of several sites or relocation to a new site)
- There is a diminished requirements of the business for employees to do work of a particular kind
Employers must inform and consult with employees on any potential redundancies and follow a fair process in carrying out the redundancy. There are different rule based upon the number of employees being made redundant or whether there is a recognised trade union. Employees can be awarded compensation if the process is not undertaken correctly. Expert advice should be taken as soon as redundancies are contemplated.
How an employee can succeed in a claim against redundancy
Whilst redundancy is a potentially fair reason, it could amount to an unfair dismissal if:
- It is not a genuine redundancy situation
- The employee is not appropriately informed or consulted
- A fair procedure is not followed
- An employee is selected on discriminatory grounds
- An employee is selected because they raised a complaint of discrimination or whistleblowing
- An employee is made redundant whilst on maternity leave
- Alternatives to redundancy are not considered
How an employer can defend redundancy
For a dismissal on the grounds of redundancy to be fair an employer must establish that redundancy was the real reason for the dismissal and that it acted reasonably, in all the circumstances, in treating redundancy as the reason for dismissing the employee. It must also show it followed a fair procedure in carrying out the dismissal, including engaging in meaningful consultation.
How much can be claimed
If successful in a claim for unfair dismissal an employee can claim a basic award which is calculated in a similar way to a statutory redundancy payment, based on a formula that takes account of age, length of service and the amount of a week’s pay (subject to a statutory cap). A compensatory award can also be claimed based upon financial losses cause by the unfair dismissal. The maximum compensatory award is the lower of 52 weeks’ pay or £89,493 . This will rise to £93,878 on 6 April 2022. If the dismissal is found to be discriminatory, there is no limit on compensation. It is also possible for an employee to seek reinstatement or re-engagement (where practical), instead of monetary compensation.
General time limit:
Time limits in the Employment Tribunal are very strict. You have 3 months less one day from the date of termination of employment in which to bring a claim. All time limits are subject to the rules on the automatic extension of time for ACAS early conciliation. You have 6 months less one day if you are only bringing a claim for a statutory redundancy payment. Speak to our experts if you have concerns regarding time limits.
Our team has extensive experience in guiding clients through the redundancy process, as well as challenging unfair processes. We would advise taking advice early in the redundancy process.