Redundancy – Reduction in Headcount Not Required

The EAT has held that it is not necessary for the number of employees carrying out work of a particular kind to be reduced in order to satisfy the definition of "redundancy".

In this particular case, a firm suffered a downturn in business and therefore had a diminished need for the book-keeping services carried out by one of its employees. As a result, the employer sought to significantly reduce the hours she worked each week. The employee refused to work reduced hours and therefore was dismissed.

The Tribunal found that she had been dismissed by reason of redundancy and was therefore entitled to a statutory redundancy payment. The EAT subsequently upheld this decision and in doing so confirmed that the actual headcount of employees does not need to be reduced in order for a redundancy situation to have arisen.

What do I need to know?
In accordance with the Employment Rights Act 1996 (“ERA”), a redundancy situation will arise if the employer’s requirements for employees to carry out work of a particular kind have ceased or diminished or are expected to do so. This decision has confirmed that reducing the amount of work to be done by the same number of employees can give rise to a redundancy situation.

Employers should bear in mind, however, that a reduction in hours will not always amount to a genuine redundancy situation. Each decision will be fact sensitive and will need to be assessed on the particular circumstances of that individual situation.

More Redundancy! - Subjective Selection Criteria

As a general principle, in order to be reasonable, redundancy selection criteria should, so far as possible, be objective and capable of independent verification. This means that criteria should be measurable and not based on someone’s personal opinion. However, a recent Tribunal case has held that there are some circumstances in which subjective selection criteria will be acceptable.

In these particular circumstances, a Company carrying out a redundancy exercise used some subjective selection criteria to assess which role in the affected team could be lost with the least affect on its business.

Both the Tribunal and the EAT on appeal found that the dismissals were unfair overall. However, the EAT did not agree with the Tribunal’s finding that the selection criteria used, which had involved a degree of subjective judgment, were inappropriate. The EAT held that subjective criteria could be acceptable provided that they could be assessed in a dispassionate or objective way, particularly where the company faced with the redundancy situation was a relatively small company in serious financial difficulty, as was the case here. Further, the EAT was critical of selection processes that were limited to “box ticking” exercises on the basis that they had to be objective.

What do I need to know?
This decision does not change the general principle that in carrying out a redundancy selection process, employers should, as far as possible, be objective. One way of doing this is by being able to refer to verifiable documents and records as evidence of the score awarded. Another is to have more than one manager score those employees at risk. This will help to avoid accusations that the selection criteria process is biased and therefore unfair. However, this decision does show that in certain circumstances where the employer is still able to point to “unbiased” evidence, criteria which involve some degree of subjective determination will be acceptable.

Some Other Substantial Reason (“SOSR”) Dismissals

The EAT has held in a recent case that even where there has been a genuine breakdown in trust and confidence between the employer and employee, and therefore a genuine SOSR dismissal, the Tribunal is still entitled to take into account the causes and surrounding circumstances of that breakdown.

In brief, this recent case involved a Teacher, who had a friendship with another former Teacher who had been suspended for possessing indecent images of children. Her continuation of this friendship led to a breakdown in trust and confidence between herself and the Head teacher of the school, who had advised her not to carry on contacting the Teacher who had been reprimanded for those offences.

Following her suspension, an investigation and disciplinary and appeal hearing, the Teacher was eventually dismissed on grounds that her relationship with the Head teacher had been irreparably damaged.The dismissed Teacher subsequently brought a claim for unfair dismissal and the Tribunal concluded that her dismissal had indeed been unfair. Although it accepted that the school genuinely had “some other substantial reason for the dismissal” (i.e. the loss in trust and confidence between the Head teacher and the Teacher), it concluded that the dismissal had not been reasonable in all the circumstances. In reaching this decision, the Tribunal took into account the circumstances of why there had been a breakdown in trust and confidence between the parties.

The EAT agreed with the Tribunal’s approach and upheld the decision of unfair dismissal. In doing so, the EAT confirmed that:

• The Tribunal was perfectly entitled to examine how the employer’s lack of confidence had arisen. If the Tribunal was not able to do this in SOSR dismissal cases, then it may be open to an employer to dismiss for any reason or for no reason at all, provided that it could establish that there had been a genuine breakdown in trust and confidence between the parties. This was not an adequate given that unfair dismissal legislation is designed to protect employees from exactly this practice.
• In “SOSR” cases such as this where the substantial reason relied upon for the breakdown in trust and confidence is a consequence of the employee’s conduct, it is essential to examine the circumstances leading up to the dismissal and to assess whether the principles of fairness applicable in misconduct dismissals have been adhered to. In this particular case, the Tribunal and EAT took into account the fact that the teacher had not been warned of the potential consequence of dismissal if she continued with her behaviour. The EAT concluded that the requirement to follow these general principles of fairness in matters involving misconduct was not automatically wiped out simply by the conclusion that there had been a genuine loss of trust and confidence.

What do I need to know?
This case serves as a note for caution for employers when relying on a SOSR reason to dismiss when the issue is really one of misconduct. In this case, the Tribunal approached this SOSR matter in a similar way to which they would have done in a misconduct case and determined that, given the circumstances, it was appropriate for the relevant principles of fairness, including those requirements under the ACAS Code of Conduct to be fulfilled.

Even where there is a genuine breakdown of trust and confidence, Tribunals are entitled take into account the circumstances and substantial merits of the case to determine whether or not the dismissal was reasonable in all the circumstances.

Effective Dates of Termination

A number of our recent editions of Employ! have stressed the importance of clarity when communicating or affirming the effective date of termination of an employee’s contract of employment. We have seen how a failure to do this can lead to Tribunal claims being allowed after the date on which the employer believed the time limit for bringing such claims had expired.

In a recent case, the EAT has held that the EDT had been varied where the employer had changed that date on an appeal by the employees against their dismissal.

In this case, the employees, who had been dismissed for gross misconduct, initially received a letter terminating their employment summarily as of the date of the letter of termination, being 5 October 2010. The employees unsuccessfully appealed and in the letters rejecting the appeal, the employer stated that the effective date of termination was in fact 4 November 2010 (the date on which their appeals were dismissed). The employees were also paid in full up to this date.

The employees subsequently lodged unfair dismissal claims relying on 4 November 2010 as the EDT. The employer initially acknowledged in their Response form that the EDT was 4 November 2010 but then subsequently sought to argue that the correct EDT was in fact 5 October 2010 and that the employees’ claims were therefore out of time.

The EAT rejected this argument and confirmed that the employer had in these particular circumstances intended to change the date of termination to 4 November 2010. Although it was unusual for an employer to do this, it was clear that they had done so and this could not be interfered with by the EAT.

What do I need to know?
The EDT is a statutory construct which is defined as the date on which the employee’s notice expires, or the date on which termination takes effect, where the employee has been dismissed without notice. Case law has confirmed that the EDT is a matter of fact as to what actually happened and cannot be changed by what the parties may agree to treat as having happened.

In this case, the Tribunal held that the decision to vary the EDT at the appeal stage was part of the process of what actually happened between the parties and was therefore relevant for establishing the EDT. The Tribunal found that on the facts, the employer had in these circumstances intended to change the date of termination from 5 October 2010 to 4 November 2010.

Legislation update: Enterprise & Regulatory Reform Bill 2012 / 2013 (“ERRB”)

The ERRB was introduced in May this year and is currently being considered by parliament. The Bill will implement a number of the Government’s proposals to reform employment law and cut-red tape for businesses. In particular, many of its proposals are in response to the “Resolving Workplace Disputes Consultation” which concluded last year.

Two of the proposals in particular focus on encouraging employers and employees to come together to settle disputes before they reach the Tribunal:

Settlement Agreements

Under the bill, compromise agreements which are currently used between employers and employees to settle disputes will be re-named “settlement agreements”. At present, in order for settlement negotiations with employees to be “without prejudice”, they must be part of a genuine attempt to resolve an existing dispute between the parties. In fact, many such agreements are discussed and concluded under the guise of being “without prejudice” when the rule would not in reality have properly been invoked because of the lack of an existing dispute.

The ERRB includes a provision to give employers greater protection when offering settlement agreements outside of the context of litigation. Evidence of such offers could not then be used as evidence in unfair dismissal proceedings, however they could still be referred to in other claims such as discrimination and breach of contract which has led to some questions about the workability of the proposal. The intention is to give employers the ability to talk frankly with employees about bringing their employment to an end without fear that such negotiations will be later used against them in litigation.

There is some debate as to how effective this provision will actually be in reducing the fear of litigation for employers, and whether, in reality, as it is currently drafted it will have any impact on the practice of discussing things informally “off the record” as is already commonly adopted by employers. What is certain is that if and when this proposal becomes law, there will be some interesting cases heard about how it operates and refining what will and will not be admissible!

Mandatory ACAS procedure

The Bill includes a new mandatory four-step procedure for pre-claim conciliation through ACAS. At present, parties are encouraged to liaise with ACAS to explore settlement. However, under the new provisions, there will be a duty on the parties to attempt pre-claim conciliation. Under the proposals, claimants will be unable to submit their claim form to the Tribunal until they have obtained a certificate to confirm that they have attempted conciliation during the “prescribed period” (proposed to be a month).

We will continue to update you on the other proposed reforms in this Bill, and what they might mean for your business, as it progresses through parliament.

Your Questions Answered

Q: We have an employee who has been off on ordinary maternity leave (“OML”) and then additional maternity leave (“AML”) for the last 12 months. While she was absent, we got in a replacement that has subsequently proved much more efficient at doing the job than the employee on maternity leave! I have been told that where an employee takes over their OML (i.e. more than 6 months maternity leave) they do not need to be offered the same job on return and instead can be appointed to an alternative role? The employee is due to return from maternity leave shortly, and if at all possible, we want to move her into a different position and keep the replacement on. Can we do this?

A : In short, you are going to have to tread very carefully in this matter. There is a common misconception that an employee who has taken leave beyond OML (i.e. a period of AML as well, as this employee has), does not have the right to return to the same job, but instead can be offered an alternative.

The reality is that whilst the employer may have more flexibility to provide a suitable alternative, this only applies where it is not practicable to permit that employee to return to the same job. A typical example of this would be a reorganisation taking place in the employee's absence resulting in the role that she previously adopted no longer being available. In those circumstances, the employer may be entitled to offer her a suitable alternative role on terms no less favourable than her previous position.

There is case law which states that a mere preference to keep a maternity cover employee in the role (e.g. because they are better at the job than the employee on maternity leave) will not generally satisfy the “not reasonably practicable” test. Accordingly, "bumping" the returning employee out of her previous role in favour of the maternity replacement risks claims of maternity discrimination and constructive unfair dismissal.