COVID-19: Guidance Tracker

Employment Law Updates

Posted on: 11 May 2020

Redundancy and Coronavirus: Picking up the Pieces

by Gordon Menzies

1. Clearly recent events have had a huge impact on business and substantial changes to the nature and size of workforces is expected which will, unfortunately, require consideration of redundancies.

2. The threshold conditions for redundancy are well known as set out in s139 ERA:

139.— Redundancy .
(1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—
(a) the fact that his employer has ceased or intends to cease—
(i) to carry on the business for the purposes of which the employee was employed by him, or
(ii) to carry on that business in the place where the employee was so employed, or
(b) the fact that the requirements of that business—
(i) for employees to carry out work of a particular kind, or
(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,
have ceased or diminished or are expected to cease or diminish

3. As will be appreciated Employment Tribunals will be unlikely to consider in detail why there has been such a cessation or diminution of work of a particular kind (it is legally irrelevant) but the pressures that events of the past months have put on business may be readily apparent.

4. As ever, the key to dealing with such scenarios is fair procedure. Consultation time limits for companies with larger numbers of employees are not going to change but for smaller businesses it may be that Employment Tribunals will take into account any acute time pressures caused by the current situation.

5. Clearly the core elements of fair procedure are warning, consultation, fair selection of pool and criteria and consideration of alternative employment.

6. In relation to warning it may be that employees are well aware of the risk of a long-term downturn in the work of a business but it is important that specific warning is given to specific employees of a specific redundancy exercise. An employer cannot rely on any general perception by employees about the problems a business may be facing.

7. Consultation can go hand in hand with warning although sight should not be lost of the fact that Employment Tribunals treat these as two separate elements. It is here, perhaps, that Employment Tribunals may give some more leeway than otherwise as far as time for consultation is concerned if there is a need to act quickly and statutory time limits do not apply.

8. It is likely that it will be in this context that flexible working may be raised and will need to be considered as a way of preventing redundancies. Employers will be alive to the fact that working from home may not necessarily avoid a redundancy situation because any cost saving may be marginal. However clearly short time/part time working arrangements may be attractive in this context. If such arrangements are proposed then a separate agreement is advised as it may amount to an attempt to vary the present contract. Also if this proposal is for a temporary period then the agreement should make the proposed duration clear and/or specify a mechanism for termination. The benefit of having such arrangements in writing is obvious.

9. Changes to terms and conditions may also have to be considered. Employment Tribunals are particularly concerned about the way such changes are proposed. In the context of a potential claim for constructive dismissal arising from such an exercise the emphasis, as far as Employment Tribunals are concerned, has been on fair procedure rather than substantive perceived unfairness.

10. In relation to fair selection of a redundancy pool it should be noted that the pool does not have to be drawn from those doing exactly the same kind of work so long as an employer has genuinely applied its mind to the issue of the pool.

11. As far as objective criteria for selection from the pool is concerned, it is worth remembering that criteria can sometimes be too objective. In the case of Biluan v Mental Health Care (UK) Ltd UKEAT/0248/12 [2013] All ER 265 the redundancy criteria were split into three: 20% for disciplinary record, 20% for sickness absence and 60% for competency. This led to some ‘surprising’ choices and ultimately it was held to be unfair as there should have been some input by managers to ‘moderate’ the results.

12. Using sickness absence as one of the criteria is likely to become more controversial in the current climate.

13. Lastly, there will need to be consideration of alternative employment. The obligation is to take reasonable steps – not every conceivable step.