Redundancy – difficult issues

Any business going through a redundancy process is unlikely to find it an easy or pleasant experience, but how should you deal with some of the more tricky issues that may arise? Sarah Lamont provides some tips on avoiding potential traps.

17/10/2008

In this article...


Any business going through a redundancy process is unlikely to find it an easy or pleasant experience, but how should you deal with some of the more tricky issues that may arise? Sarah Lamont provides some tips on avoiding potential traps.


Age discrimination

Many employers offer enhanced redundancy payments which are linked to age. Unless these follow the statutory redundancy scheme, they will fall foul of the Age Discrimination Regulations and must, therefore, be justified. In the case of Galt and others v National Starch and Chemical Limited (September 2008, unreported) an Employment Tribunal did not accept the employer’s argument that age-related redundancy payments were justified because they aimed to ‘cushion the blow’ for older employees entering the job market. Although the tribunal found that this could be a valid defence in principle, the employer had failed to produce any evidence of its reasoning and this failure was fatal to its case.

Therefore, if you offer age-related redundancy payments, which do not mirror the statutory scheme, you should,

  • be clear about the aim of your scheme;
  • ensure you can evidence how and why the scheme will achieve those aims; and
  • consult with employees and / or union representatives to get as much employee buy-in to the scheme as possible. 

The High Court also confirmed last week, in Rolls Royce plc v Unite the Union, that a redundancy selection criteria which awarded points based on length of service would not amount to indirect age discrimination. The High Court interpreted such a provision as a lawful ‘age related benefit’, under Regulation 32 of the Age Discrimination Regulations.

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‘Ring fencing’

Some employers, particularly in the public sector, may ‘ring fence’ vacancies so that only employees in a certain pool of selection may apply for specific roles. For example, a senior account administrator vacancy may be ring fenced for employees in a pool of selection consisting only of senior account administrators. Employees may complain that the pool for which this role is ring fenced is too small or too wide, so there is always likely be a risk associated with ring fencing. Even if you attempt to minimise risk by using as wide a pool as possible, you may still be criticised for giving junior staff the opportunity to be promoted ahead of their colleagues. You would then need to look at whether you could justify this because (for example) there may be a cost saving in promoting a less experienced member of staff. The main point to note on ring fencing is that there is no clear cut answer; but you must be able to demonstrate that you have applied your mind to the process in a logical manner. Once you have done so, you may also be able to minimise your risk of a claim by seeking employee and / or trade union agreement to your proposals at an early stage in consultation.


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Maternity issues

Going through a redundancy process with employees who are pregnant or on maternity leave may present some challenges, but it is by no means impossible. The following are some points to consider.

  • Out of sight can be out of mind. Ensure that maternity leave employees are included in the consultation process by writing to them at home and inviting them to consultation meetings. You may wish to offer consultation meetings by telephone if it is more convenient.
  • Remember that employees on maternity leave are entitled to be offered any suitable vacancies in preference to other employees at risk of redundancy. 
  • It may be more convenient for you to pay maternity pay in one lump sum on making a maternity leave employee redundant, rather than keep her on the payroll. It is lawful to do so, but it may cost more in national insurance contributions. You would also need to make the payment subject to any changes that may affect the employee’s maternity pay, such as KIT days, and ensure that you reserve the right to recoup any overpayment of maternity pay if the employee loses their right to pay by, for example, working in excess of 10 KIT days. 


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Sick leave

Unless classed as having a disability, employees on sick leave do not qualify for any special protection during a redundancy exercise. The practical problem may be consulting with employees on sick leave if they are unable to attend meetings. If invitations to meetings are refused on the grounds of ill health, you may wish to seek further information from the employee’s doctor regarding the employee's abilities. Remember that if the collective consultation procedure does not apply, then you will also need to follow the statutory dismissal procedures, and invite employees to at least two meetings. You must also ensure that the dismissal adheres to the general principles of fairness, and that you have made reasonable attempts to consult, even if employees are not available at work. It may be that consultation meetings could be,

  • conducted by telephone; or 
  • on behalf of the employee by a representative; or
  • in writing. 

In extreme circumstances, where the employee does not accept any reasonable alternative suggestions for undertaking a meaningful consultation process, you may be forced to go ahead and dismiss the employee on the basis of the information that you have available. If this occurs, then the employee must be informed and must be made aware of the potential consequences.

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Summary points to note

When running a redundancy exercise:

  • ensure that you can provide evidence that an age-related redundancy payment scheme is a proportionate means of achieving a legitimate aim;
  • carefully consider the correct pool for ring fenced roles and consult on your proposals; 
  • include maternity leave employees in your consultation exercise; 
  • draft carefully any agreement for maternity pay to be paid in a lump sum;
  • consult with employees on sick leave and offer alternative forms of consultation if possible. 

 

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