Genuine Redundancy Mastery: Fair, Compliant Dismissals in Cardiff

Responsible redundancy: Establishing genuine redundancies and a fair selection process for employers. The prospect of planning dismissals on the grounds of redundancy is never easy - for you as an employer, or for your team. But if change is unavoidable, it’s vital to handle the process with care, clarity, and compliance. There will be a lot to consider and there are several fundamental stages to factor in.

The first step is to understand what is meant by a redundancy dismissal. Then you should establish exactly what changes are required within the business and what impact that will have upon the amount and nature of work carried out, the number of employees required to perform that work. Finally, you will need to plan and achieve a fair and transparent selection process, incorporating the appropriate consultation.

Our expert employment law solicitors can review the process and discuss your options, helping you make informed decisions while treating people with the respect and transparency they deserve. Redundancy has a technical statutory meaning in employment law, and so fully understanding what redundancy means is critical before embarking on a redundancy process.

Under the statutory definition, redundancy is where the dismissal is wholly or mainly attributable to the closure of the business or place of business where the employee worked or the business’ requirements for employees to carry out work of a particular kind is no longer needed.

Leading case law – the three-stage test in Safeway. The leading case on establishing whether an employee has been dismissed because of redundancy is the EAT decision in Safeway Stores plc v Burrell. It is important because it sets out a three-stage test, as follows:

• Was the employee dismissed?
• If the employee was dismissed, had the requirements of the business for employees to carry out work of a particular kind stopped or reduced, or was there a business or workplace closure or a reduced requirement for employees to do work of a particular kind?
• If so, was the dismissal of the employee caused wholly or mainly by one of the circumstances in 2, above?

Only if the answer to all three of the above stages is ‘yes’ will there be a redundancy dismissal. Cases are still being judged by the Safeway three-stage test today and so considering whether your situation will pass all three stages before moving to a dismissal will assist with your decision as to whether this is a genuine redundancy dismissal.

When assessing your potential redundancy situation, it is important to understand what constitutes a dismissal. There is a dismissal if:

• an employer terminates the employee’s employment with or without notice
• an employee’s fixed term contract expires and is not renewed
• the employer’s conduct entitles the employee to resign with or without notice (constructive dismissal)
• there is an act of the employer or event affecting the employer such as the death or retirement of an individual employer, which terminates the employment by operation of law (for purposes of redundancy payments only, not unfair dismissal)

The employer must communicate to the employee that they are terminating the employee’s employment contract, and the date the dismissal will take effect either expressly orally, in writing, or by deeds, so that this is clear and unambiguous from the communication, as it would be understood by a reasonable observer.

Where an employer invites employees to volunteer for redundancy, an employee responding to that invitation is volunteering to be dismissed by the employer by reason of redundancy. The employee is not agreeing to resign, so where a voluntary redundancy takes place, there is generally a dismissal.

If the employer ‘has ceased or intends to cease… to carry on the business for the purposes of which the employee was employed’ there is a redundancy situation. Even if a closure is temporary and the employer intends to reopen in the future, this could lead to redundancies. It will depend on the facts of the case whether the closure is long enough to qualify.

If a business is closing so that it can change and re-open again, the facts will determine whether an Employment Tribunal decides that the new business is sufficiently different from the original business. If it is, this will mean that the original business ceased, and any dismissals were for redundancy.

If a business transfers to a new owner, the employees will likely transfer to the new owner under TUPE and will not be dismissed or made redundant, unless insolvency rules apply in a narrow set of circumstances. TUPE has its own specific set of rules and employer obligations.

If you are unsure whether your business is involved in a TUPE transfer, our employment law solicitors would be happy to assist you with that.

If there is an intention for you to cease carrying on your business in the place where the employee is employed, covering relocation and site closure, there is likely to be a closure of the workplace. To establish the workplace of the employee, it is the reality of where the employee works, at the time of the dismissal, that is relevant.

If the employee’s actual workplace is different to what is written in the employee’s contract, it is the last place of work, which matters. A mobility clause can complicate this and must be looked at when considering the ‘workplace’ of the employee, where they work or have worked in more than one location.

If an employee’s place of work is two or more places and only one is closing, it may be easier to establish a redundancy situation because of a diminishing requirement for employees, rather than closure of the workplace. However, if there is a mobility clause, and there is enough of the same work available at another location, you may choose to use the mobility clause to avoid redundancy.

This category is slightly wider than closure of a workplace, as a dismissal will be for redundancy if it is wholly or mainly attributable to reduced need for employees to carry out work of a particular kind in their workplace or within the entire business.

If you are reorganising the business, you will need to consider carefully whether there is a case for redundancy on these grounds. Other circumstances may also give rise to a redundancy situation. If two roles are absorbed into one, if a particular type of work or project reduces and so fewer staff are required to fulfil demand, if a change in role function or reduction in hours occurs or is anticipated, further consideration as to whether there is a redundancy should be given.

It is not necessary for overall headcount to reduce for there to be a redundancy situation, though. If the amount of a particular type of work reduces but other work increases, there may be work available for the same number of employees in different areas of the business; a dismissal of an employee wholly or mainly for that reason can be a redundancy.

A department may have a reduced need for a copywriter but an increased need for a business development officer, for example. When looking at whether there is less of a need for employees to do a particular type of work, a commercial judgement about the priorities of the business by the employer is the starting point.

If there is a genuine business reason, the Employment Tribunal will not require you to justify that business decision. What is clear though, is that the focus should be on the requirements of the business for employees to do work of a particular kind, not on the contractual requirements relating to a particular employee.

This may be wider than two roles with the same job title, it may also include roles with overlapping tasks and skills. It might be that work is not of the same kind if a different level of experience or seniority is required for two different roles, but generally other characteristics of a role such as salary or hours are not considered, the focus is on skills and tasks.

If there is a reduction in the requirements of the business for employees to carry out work of several kinds this could be capable of satisfying the test of reducing work of a particular kind, as there is a reduction of headcount required, even if staff are all placed in the same pool for redundancy and carry out work of different kinds.

There are many factors which may mean that making redundancies is the best course of action for your business, and whether there is a genuine redundancy will be fact sensitive, but here are some reasons which you may have for needing to make redundancies:

• External economic issues– such as an increase of applicable business rates, tariffs, or taxes, or an increase in the national minimum wage.
• Change in what your business does– if your business pivots because the market in one area becomes bigger, but another area of work reduces, so fewer employees are required in that area of your business.
• Efficient internal reorganisation– if you wish to reorganise your business so that there are fewer levels of management or roles are merged to make your business more cohesive and efficient.
• Technology replacing jobs– if your business can now use technology to save costs and make your business more productive, which will lead to the loss of jobs for your staff.
• Relocation– if your business is looking to change its location for cost or other operational reasons.

Mobility clauses in employee contracts of employment which are reasonable in scope, may allow for an employee to move and work from a different location. Dismissal for failure to relocate in this situation could be a disciplinary issue and for failure to obey a lawful instruction, rather than for redundancy.

Where suitable alternative employment has been offered. Where an employee is at risk of redundancy but suitable alternative employment has been offered, then there has not been a dismissal, and an employee will simply move from their former role, to the new employment.

Changes to the employee's terms and conditions. Reorganisations can sometimes require an employer to vary the employee’s contract in order to add extra and different tasks and duties.

However, if the employer adequately consults with the employee before enforcing the changes but due to the employee’s refusal to accept, there is a dismissal, it is possible that a tribunal may attribute some other substantial reason (SOSR) as the reason for dismissal.

Discriminatory reasons – this may seem obvious, but some of the above changes might be more of an issue if an employee has a protected characteristic.

Once a business has assessed the necessary changes it needs to make, has established whether or not those changes are likely to result in a dismissal and is satisfied that the reason for those dismissals will be because of genuine redundancy situation, the next step is to identify the pool of potentially redundant employees and select those whose employment will cease.

A redundancy ‘pool’ is just the grouping from which the individuals will be selected for redundancy. If there is a business closure and all employees are being made redundant, you will not be required to choose a pool for selection.

If there is not a business closure and you are retaining employees, then before you start the redundancy process, you will need to identify which employees are in the pool for selection.

To do this you will need to consider carefully what roles or tasks are being reduced or removed from your business. To be able to identify which group of individuals are ‘at risk’ of redundancy, you will need to look at the reality of the particular roles, or tasks your employees perform.

It is important to note that it is just a matter of identifying those employees at risk of redundancy at this stage, and no definite decisions about who will be made redundant or even if there will be any compulsory redundancies have yet been made.

The key questions to answer are what work is disappearing? Which employees do that work? Are there other employees who do similar work? These should help you to decide on the selection pool and employers do have a wide level of discretion in relation to the pools they decide upon.

Unless there is a collectively agreed or customary selection pool, if your choice of pool is within the range of reasonable responses, it will be fair.

Once you have selected a pool of individuals which will be at risk of redundancy, you will need to score them against objective selection criteria. Unless there are selection criteria prescribed in your employees’ contracts of employment or your redundancy policy, or agreed with Trade Unions or employee representatives, there is some flexibility in the selection criteria you can choose.

If there are criteria already set out, these must be used, if there are not, it is recommended that you agree on the criteria with any Trade Unions recognised by your business or employee representatives before you score the employees against the criteria.

If there is no employee representation, then selection criteria should be discussed individually with the employees through individual consultation.

The scale of the proposed redundancies is important to the type of consultation that is required. The statutory duty to inform and consult arises where 20 or more employees are proposed to be dismissed as redundant at one establishment within a 90-day period.

Examples of Criterion Some objective criteria which are easily measurable and not just based on opinion might be:

• Performance (scores from previous appraisals)
• Skills
• Qualifications
• Experience
• Disciplinary record

You might assess against these criteria from previous experience of the employee, or you may ask for at risk employees to reapply and interview for a particular role to take that process into account as part of the scoring for redundancy.

If the redundancy selection criteria are unfair or are applied unfairly, there may be potential claims for breach of contract, unfair dismissal, and/or discrimination against your business.

If an employee has been selected for redundancy for a discriminatory reason, this is automatically unfair and if that employee is dismissed under those circumstances, this could lead to an automatic unfair dismissal claim.

If you are unsure and would like to talk through the specifics of your business’ circumstances, our specialist employment law solicitors can help.

There are great advantages for employers planning redundancies who take the time to get it right from the beginning. Having identified what has happened in your business and how it has impacted the type and level of work you undertake, we can assist you in assessing how this may impact headcount, to identify those at risk and assess whether individual or collective consultation is required.

A fair and transparent selection process, applying consistent reasoning can not only reduce the level of disruption and uncertainty to your business but also achieve fair dismissals on grounds of redundancy.

To avoid making errors leading to unfair dismissal, breach of contract or discrimination claims, if you are in doubt about any of the points raised in this article, please do contact our employment law solicitors who would be happy to guide you through each stage of the redundancy process.