Handling redundancies
Redundancy handling
Based on an on-line article by Jane Hobson
, Partner, Employment Team, Weightmans LLP
At present, redundancy is fairly commonplace as employers react to the current economic crisis. This increase is also resulting in a rising number of employment tribunal cases being brought against employers.
Employers often view making redundancies as being the easy or the only option to reduced business activity and pressure on profits. Many fail to appreciate the dangers that face them in employment tribunals if they mismanage the redundancy process or fail to follow correct procedure. Any redundancy exercise, whatever its size, should be carefully planned, taking into account all legal implications, to avoid potential financial penalties that could result if the employer has not complied with the relevant legislation.
Redundancy does amount to a dismissal. This means that employees with over 26 weeks’ service who are made redundant will have protection from unfair dismissal and, if successful with a claim, can at present potentially be awarded compensation of up to 6 months’ pay, depending upon their length of service.
Where to start
A redundancy situation generally arises when an employer no longer requires a role to be undertaken; where it has a reduced need for employees in certain roles; or where a business closes. Redundancies should not be used as an excuse for addressing poor performance or absence amongst employees; they should be about the needs of the business.
Once potential redundancies have been identified, the employer needs to plan the process thoroughly, including the proposed timetable of events. In order to carry out the process properly and minimise the risk of claims, this may take a number of weeks — a fact that needs to be appreciated by those involved in the decision-making process. Specialist advice at an early stage in the process can also be very worthwhile and minimise potential claims of unfair dismissal.
At the outset the employer may wish to see if any employees wish to volunteer for redundancy. It is worth remembering in this case that an employer is not legally obliged to accept anyone who volunteers for redundancy; their request to go can be refused by the employer as long as this is made very clear at the outset.
Selection process
Initially, the employer needs to assess how many employees may be at risk of being made redundant and from which areas of the business the employees are likely to be lost.
Proposed redundancies will either involve a particular role which is unique within the business and is not similar or interchangeable with other roles, or they will involve reducing the number of employees undertaking similar roles and require some form of selection from a pool of people.
In both cases, at the outset the redundancy will only be provisional and the employee must be aware of this and of the fact that no definite decision will have been taken by the employer at this stage. A definite decision regarding potential redundancies including the number made should only be confirmed once the consultation period with the affected employees has been completed.
If the redundancies involve reducing the number of employees with similar roles, then the employer will need to utilise selection criteria to decide upon which employees are initially selected for redundancy from that pool. These criteria should be objective and, ideally, verifiable by reference to data retained by the employer. The criteria may include disciplinary records, aspects of performance supported by facts and figures and skills and experience. Absence records and length of service can also be used (but at a future date, when Jersey introduces Discrimination Law, these could potentially give rise to claims of disability and age discrimination, depending on individual circumstances and therefore need to be handled with care).
The pool of employees at risk of redundancy should be afforded an opportunity to comment upon and respond to the proposed criteria before they are scored against them. Feedback from employees may even lead the employer to change the criteria being used, having taken account of the comments made. In some cases, to aid objectivity, the employer may arrange for two managers or senior members of staff to undertake the scoring of the employees in order to avoid any allegations of favouritism being made.
Importance of consultation
The key aspect to a fair dismissal by reason of redundancy is to ensure that the consultation with all those employees potentially affected starts at the earliest possible opportunity and is both thorough and meaningful. Failings as regards the consultation process are often the cause of successful tribunal claims. Equally, it is important for the employer not to ignore those employees who are left behind after the process is complete. It is vital to ensure that communication is maintained during the course of the process, and that, as far as possible, their own concerns and fears for the future are addressed. Often, once the redundancy process has been completed, the organisation can function more efficiently, benefiting its future growth and success.
Regardless of the number of employees involved in the redundancy exercise, the employer must undertake meaningful individual consultation with those who are identified as at risk of redundancy and this may take several weeks to complete.
The consultation process enables the employees to put forward their views on the proposed redundancies, suggest alternatives including ways of avoiding redundancies and ask any questions or put forward any information that they would like their employer to take into account.
After the scoring against selected criteria is complete and certain employees have provisionally been selected for redundancy, these employees need to be given anonymous information as to their own and other employees’ scoring within the relevant pool so they can question and possibly challenge their scoring. Potentially, this process could lead to their scores being altered and another employee being selected for redundancy.
Transparency, communication and patience are crucial parts of the consultation process. Consideration must be given by the employer to any points put forward by the affected employees.
In cases involving 6 or more potential redundancies in a 90–day period (2 or more redundancies if a trade union is recognised) the Employment (Jersey) Law will soon require that, in addition to individual consultation, there will be an obligation upon the employer to undertake collective consultation with trade unions or employee representatives which will last for at least 30 days.
This may mean that the employer has to arrange elections of employee representatives and provide specific information including details of the reasons for the redundancies, how employees will be selected and how dismissals will be undertaken. Failure to comply with the collective consultation requirement can leave the employer liable for significant financial penalties.
Further, in such cases, the employer must advise the Minister of Social Security of the number of redundancies proposed.
Alternative employment
As part of the consultation process the employer also has to make every effort to look for alternative roles for the employees who are at risk of redundancy. The employer should not make any judgments or assumptions about what the employee might or might not be prepared to accept but should always provide details of all opportunities; including any at different sites. Employees should also be afforded time off to attend interviews and seek other work.
Other options
Besides redeployment, think "outside the box" about ways of avoiding redundancies. In a number of instances here and in the UK, employees have accepted periods of unpaid leave, temporary reductions in the length of the working week (with a corresponding reduction in pay), a general pay cut for all or job-sharing as ways of avoiding the need for redundancies.
Documentation
In any case of dismissal, it is crucial that the employer documents each step in the process and retains copies of these documents as they will play an important part in defending any claim of unfair dismissal. This means that employees should be written to by way of letter or e-mail at each key point in the process, that notes should be taken of any meetings or discussions that take place with them and these notes are shared with the employee concerned.
Employees need time to consider their position at each stage in the process and should be given time to prepare for meetings. If they wish they should be allowed to be accompanied by a trade union representative or a work colleague who may act as their witness in the process.
When the redundancy is confirmed to the employee both verbally and in writing, he or she should be afforded an opportunity to appeal against the decision to someone within the business who has not been involved in the initial process.
(JACS comment: it is not easy to advise on how to handle appeals at this late stage. If an employee is successful in his appeal having been selected for redundancy, it follows that another employee who had thought their job was "safe" now needs to be told that they are to be made redundant instead. It is for this reason that detailed consultation is so important throughout the whole process so that any potential appeals or misgivings that emplyees have are dealt with at an early stage. If the process is sufficiently robust, the likelihood of an appeal following fair selection is much reduced.
Some employers address this potential hurdle by discussing each person’s selection criteria score with them and reaxching agreement that the score is fair before announcing who has been selected for redundancy).
Payments
At present Jersey legislation does not provide for statutory redundancy payments, although an amendment to the Employment (Jersey) Law will be enacted in early 2010. Under these new provisions, upon dismissal by reason of redundancy, employees with two or more years of continuous employment will be entitled to statutory redundancy pay. This will be one week’s pay (capped at the average earnings level as published each year) for each year of continuous service, including service beyond age 65, along with notice or pay in lieu of notice — either based upon the terms of the employee’s contract or the statutory entitlement (which will change on the date statutory redundancy payments are introduced to one week for each full year of service up to a maximum of 12 weeks), whichever is the greater.
Tribunal claims
As redundancy is a dismissal, then if the employee has completed 26 weeks’ employment at the time of his or her termination, he or she may claim for unfair dismissal before a tribunal. There is no fee involved in making such a claim and often the individual, unlike the employer, will be able to secure free representation from a trade union or legal advice via household insurance policy.
Defending a tribunal claim is a time-consuming process. In addition hearings are open to the public, so that an employer who has failed to follow the correct process may well be subjected to adverse publicity in the media.
All this means that directors cannot afford not to be involved in the redundancy process and need to appreciate the important part that they can play in ensuring that the correct procedures are followed by all those involved, and that at such a very difficult time their employees are treated fairly and reasonably and with proper respect.
Based on an on-line article by Jane Hobson
, Partner, Employment Team, Weightmans LLP