Redundancy: genuine or just ‘window dressing’?

Over the past 18 months, we have all, unfortunately, become accustomed to regular announcements of redundancies and shutdowns, but it is important that employers do not use the current economic climate to dismiss staff as redundant, unless this is genuine.


Performance or other issues ‘dressed up’ as a redundancy dismissal will lead employers into difficulties, and often a tribunal claim will follow. The problem for employers is that they often find performance managing an employee both a time consuming and uncomfortable process, whereas redundancy is often seen as an acceptable way of dismissing an individual, as it can be said to be no reflection on the individual themselves, but merely a sign of the times.


Definition


While everyone is familiar with the idea of a redundancy situation, the concept of redundancy is a statutory one, and the statutory definition must be met before a genuine redundancy dismissal can be made.


The statutory definition effectively covers: business closures, workplace closures, or a reduction in the requirement for employees to do a particular kind of work. An employer may decide to make redundancies for a number of reasons – for example, due to the recession and economic pressures; where there is a reorganisation of the business to make more efficient use of roles and duties; where there are technical advancements altering existing roles; or where there is a business relocation. In the current climate, companies looking to streamline their business may seek to absorb the duties of one role into another.


In determining whether a dismissal falls within the scope of redundancy, however, the courts will not look to challenge business decisions, so will not look at whether redundancies could have been avoided if a different decision had been made. What the courts will look at is whether the reason is genuine, as opposed to a dismissal for another reason that is being hidden behind a supposed redundancy.


Fairness


While redundancy is a potentially fair reason for dismissal, the employer must also make sure that it has followed a fair procedure in carrying out the redundancy to minimise the risk of a claim. The basic position is that the dismissal is likely to be unfair if the employer fails to consult over the potential redundancies, identify the correct pool for selection, and offer suitable alternative employment where appropriate.


Interestingly, the Acas code, which replaced the statutory discipline and dismissal procedures in April last year, does not apply to redundancy dismissals. Therefore in determining the fairness of any procedure followed, the only principles applicable will be those established by case law.


What can often be difficult is, where the employer is absorbing roles, the question of the correct pool for selection must be looked at very carefully. Provided the employer applies its mind to the issue of pools, it is very difficult for an employee to challenge the choice of pool – the employer only has to show that it acted reasonably. In determining the pool, the employer should consider what particular kind of work is disappearing and which employees do that kind of work.


If there is a clear correlation between the kind of work disappearing and the group of employees, then the pool is likely to be easy to identify. The issue gets complicated where employees are multi-skilled and their roles are effectively interchangeable. However, employers are often reluctant to draw up a wider pool on the basis that the impact on morale is greater. Therefore, on a commercial level, employers may prefer to either use a narrow pool, or bypass the pool stage altogether, and only consult those provisionally selected for redundancy. This will naturally make them more vulnerable to claims for unfair dismissal, but may be more commercially attractive.


Conclusion


There are therefore many aspects for employers to consider when making redundancies and it should not be seen as an easy alternative to dealing with difficult performance issues. If the reality is that the competence of the individual performing the job required is being questioned, this should be dealt with as a performance issue, and not as a redundancy.


While redundancy has become more commonplace and, to some extent, more acceptable, it should never be used as a route to try and resolve other issues within the business. Doing so is likely to come back and haunt the company at a later date. 


By Hilary Aldred (pictured left), partner, Charles Russell Employment and Pensions Service

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