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Newbury employment solicitor offers advice on redundancies and small businesses

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Andrew Egan answers the legal questions

I AM currently advising some small businesses in relation to possible redundancies they may have to make as a result of the current Covid-19 pandemic and its effect on their businesses.

Some of the questions I am asked are as follows:

Should employers have a formal redundancy procedure?
Ideally yes. Redundancies are subject to a range of requirements and failure to observe them could lead to claims for unfair dismissal (if the employee has over two years service), as well as discrimination (which has no minimum service requirement).

An employer can reduce the risk of such claims by having a procedure which covers:

  • Looking for alternatives to redundancy;
  • Identifying a reasonable pool for selection of employees from whom those selected forredundancy will be chosen;
  • Adopting objective selection criteria and applying them fairly to employees within this pool;
  • Establishing a clear proposal regarding potential redundancies and supporting rationale;
  • Warning employees about the proposal;
  • Consulting with employees about the proposed redundancies;
  • Seeking a view from the trade union (if the employee has one);
  • Informing and consulting employee representatives (or trade union representatives);
  • Considering alternative employment for those whose roles are made redundant;
  • Allowing employees to appeal the redundancydecision; and
  • Giving reasonable paid time off to look for work or to arrange training for future employment.

An employer who makes individual employees redundant must follow fair and reasonable procedures.

Can the business select people for redundancy based on performance?
Yes, provided this is a genuine selection criterion.

Objective evidence such as appraisals, sales figures, productivity records, would demonstrate that you are selecting the people who make the lesser or least contribution to the business, rather than selecting favoured employees.

You need to watch out for potential discrimination claims when doing this. For example, an employee who was pregnant during the period reviewed in relation to performance may argue any poor performance was as a result of their pregnancy, making their selection discriminatory.

If we previously paid generous redundancy pay, do employees have a right to it this time?
If an employee’s contract states that they will receive enhanced redundancy payments, you are legally obliged to pay those payments.

If there is no express right for an employee to be paid an enhanced redundancy payment, they may be able to establish that there was an implied right to such a payment through custom and practice.

If there is a history of enhanced redundancy payments being made, this will support the employee’s claim.

Even if such a payment is described in company documents as ‘discretionary’, it may be held to be a contractual entitlement because of the way the payments have been paid in the past.

Some former employees have claimed that redundancies we made were not genuine because we subsequently took on more staff. Is this a problem?
It depends. For redundancy to be a fair reason for dismissal, you must be able to demonstrate there is a genuine redundancy situation.

A genuine redundancy situation is where you have closed or intend to close the business where the employee worked, you have closed or intend to close the place of business where your employee worked, and/or there is a reduced requirement or you expect there to be a reduced requirement for your employee to carry out their work.

A redundancy situation can arise as a result of a downturn in business or the expectation of a downturn.

You need to be able to show that you had a reasonable expectation that the business in which the previous employees worked was about to cease or their work was about to cease or diminish.

If, however, your former employees convince an employment tribunal that you used the pretext of redundancy to terminate them where there was no genuine redundancy situation, they may succeed in bringing an unfair dismissal claim.

Do we have to minimise redundancies by cutting costs elsewhere in the business, even if we lose some good employees?
Yes. Redundancies should be the last resort.

A redundancy is more likely to be viewed as ‘fair’ if you consider alternatives in advance of commencing a redundancy consultation process.

Your options would be to offer early retirement to employees who volunteer to take retirement; terminate temporary contracts, retrain or redeploy workers, reduce or remove overtime working, offering sabbaticals or arrange secondments, etc.

You don’t have to implement alternatives if you do not believe these would be beneficial to the business.

You need to be able to reasonably justify the redundancy decisions otherwise, in case any employees bring claims of unfair dismissal or discrimination.

For advice for your business, call Andrew Egan on 07904 391756 or (01635) 890560.

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