MAKING FAIR DISMISSALS

Deciding who makes the cut and telling those who haven’t is never easy. Here are a few tips to smooth the process

No employer likes to make employees redundant. Unfortunately, as the recent decision for 100 planned redundancies at the AA illustrates, and the announced Andrew Page branch closures might mean, sometimes difficult decisions do need to be made.

For the process to work properly, it is important that redundancy dismissals are handled sensitively and in accordance with the law. Any employer that fails to comply with its legal obligations during a redundancy situation could face complaints from employees and claims for compensation for unfair dismissal as a result.

WHAT IS A REDUNDANCY SITUATION?
In an employment law context, redundancy has a very specific meaning. To summarise, the statutory definition of redundancy identifies three sets of circumstances that amount to redundancy situations – a business closure; workplace closure; or reduced requirements of the business for employees to do work of a particular kind.

There is no mandatory procedure laid down by legislation in England and Wales for fairly dismissing an employee for redundancy reasons. Instead, employers must follow a fair procedure involving individual consultation. Dismissal decisions must be fair and reasonable. Case law has determined various principles of fairness that an employer should follow in order to reduce the risk of employees pursuing claims for unfair dismissal.

Generally, these principles require an employer to give employees early warning of the risk of dismissal; consult with employees (and the union if required); identify an appropriate “at risk” pool for redundancy; draw up and apply fair selection criteria; and give consideration to alternative employment.

CONSULTATIONS
First, an employer looking to make a number of employees redundant must check whether the obligation to engage in collective consultation exists. Where there is a proposal to make 20 or more employees at one site redundant within a 90-day period, the employer must engage in collective consultation with a trade union. If no trade union is recognised for that particular employer, then an employee representative will need to be elected, with whom the employer will need to consult. The employer will also need to notify the secretary of state of the number of planned redundancies.

Employers should seek specific advice in circumstances where multiple redundancies are planned as there are a number of obligations.

Even where a collective redundancy situation does not arise, consulting with the employee(s) at risk of redundancy is absolutely vital and will be central to the fairness (or otherwise) of the decision to dismiss. Consultation should be genuine and take place at a time when the employer can properly consider the employees views and suggestions – that is, before the final decision is made.

THE “AT RISK” POOL
Before selecting an employee or employees for redundancy, an employer must consider what the appropriate pool of employees for redundancy selection should be. Otherwise the dismissal is likely to be unfair.

There are no fixed rules about how the pool should be defined and, unless there is a collectively agreed or customary selection pool, an employer has a wide measure of flexibility here.

The question of how the pool should be defined is primarily a matter for the employer to determine and, provided an employer genuinely applies its mind to the choice of a pool, it will be difficult for an employee (or a tribunal) to challenge the choice.

Factors that are likely to be relevant to identifying a pool are the type of work is ceasing or diminishing; the extent to which employees are doing similar work (possibly even those at other locations); and the extent to which employees’ jobs are interchangeable within the workforce.

SELECTION CRITERIA AND SCORING
Once an employer has identified the employees in the at risk pool, it will need to apply selection criteria to determine those at risk of redundancy. To do this, employers will need to develop appropriate selection criteria. The criteria, which of course must be objective and fair, might want to look at things like disciplinary record, length of service and performance. Criteria which relate to protected characteristics such as age, disability, religion or sex must be ignored.

The employer will need to mark each of the potentially redundant employees according to the finalised selection criteria.

Different weighting can be given to different criteria. It can also be useful to ask different managers to independently score employees in the at risk pool in order to ensure objectivity.

ALTERNATIVES TO REDUNDANCY
In many cases, consultation between employer and an employee who is at risk of redundancy will be focused on finding an alternative to dismissal on redundancy grounds. Employers should be prepared to discuss the steps that it has taken, or has considered taking, to reduce the risk of (or number of) redundancies. This might include things like a recruitment freeze and terminating the engagements of agency workers before embarking on the redundancy process.

Equally, employers should provide details of any vacancies to employees who are at risk of redundancy in order to minimise the number of dismissals that might need to be made.

STATUTORY PAY
Lastly, when making redundancies, employers should bear in mind that employees are entitled to an SRP payment where they are dismissed by reason of redundancy and have at least two years continuous employment at the date of the dismissal. The calculation for this can found at: gov.uk/calculate-your-redundancy-pay

Managing a redundancy process to ensure fairness can be difficult. It is crucial that an employer carefully plans the process at its beginning and critically before consultation with employees begins. Getting it wrong can have a big impact – in addition to potentially facing unfair dismissal claims, a poorly planned redundancy process may end up alienating the workforce at a time when the employer requires everyone to be particularly focused on the job at hand and morale is low.