The current economic climate has fuelled a surge of restructuring and redundancy programmes, but unless employers follow the correct procedure, they run the risk of expensive litigation, says James Baker
Another day, another round of redundancies. With unemployment levels in the UK at 2.1m in April 2009, this is the first time in the working lives of many people that things have been this bad at work.
Of course, redundancies are an unfortunate but unavoidable part of working life. Job opportunities are regulated by the market, so as one business booms another is facing trouble. Both will respectively recruit and shed staff as a result, and at its most basic we often see staff flowing from one to other, following the economic success and fleeing failure in their chosen sector.
For obvious reasons, however this is not the case at the moment. Success stories are few and far between, and staff at those exceptional places are clinging on for dear life. This desperation is also showing itself from an employment law standpoint. Employees with families, mortgages and other responsibilities cannot take unemployment lying down. They are more determined than ever to fight for compensation as they don’t know where the next job is coming from. While many employers are being more generous than usual in terms of ex gratia severance payments, employees are being more litigious before in order to maximise them.
A potential minefield
Employers in this situation need to take extra care to manage the dismissal process correctly to provide protection against the inevitable legal claims to come. Redundancy law is, to coin a phrase, a ‘minefield’. The more frequently stepped-on explosives include providing inadequate information to staff, not starting a consultation process early enough, failing to score employees properly against objective criteria and rushing through the process too quickly. Failure to do these can open the door to claims in the Employment Tribunal for unfair dismissal and compensatory awards of up to £66,200.
Guidelines for minimising litigation risks
Although it’s impossible to predict every individual feature of every redundancy proposal, here are some guidelines for running a litigation-proof process.
Financial evidence
Employers know that the law permits them to dismiss under-utilised employees, but many don’t realise that they can be required to prove that the business’s economic situation is dire enough to merit dismissals. Employers should, in advance of announcing proposed redundancies, collate data that demonstrates to employees that a redundancy situation really does exist. This will help avoid ‘unfairness’ allegations that employees were not given enough information about the process. It can also demonstrate that the situation has not been exaggerated by the employer to justify cost-cutting that isn’t really needed.
Selection
One of the key battlegrounds in any redundancy situation is selection. Employees are entitled to be judged against their peers on criteria that are capable of being objectively scored and independently scrutinised. Reasons such as being a ‘good team player’ and ‘hard-working’ can be too subjective to stand up in a tribunal as they are often based simply on the personal views of line managers. It is best to use hard facts such as appraisal results, attendance records or economic indicators (such as sales figures, occupancy rates, targets-met figures, or whatever is appropriate).
Consult, consult
Employers must consult with employees – telling people that their job has disappeared is not good enough. The employer must present the situation before a final decision has been taken. The purpose is to enlist employees to help avoid dismissals or minimise their impact – there are a number of ways that dismissals might be avoided by involving staff at an early stage. For example, if someone volunteers to take early retirement, or offers to work part time or job share with a colleague, this could avoid the need to dismiss other unwilling employees. As long as the suggestions are acceptable to the business, they should be taken on board. Failure to consult to gather ways of avoiding individual dismissals is a very common challenge at the moment. This is not to say that ‘at-risk’ employees can dictate how the business is to be run – the employer will always be able to have the last word on who stays and who goes, as long as it has opened itself up to a genuine consultation process first.
‘Collective consultation’ processes
Where 20 or more redundancies are proposed from one workplace in less than 90 days, there are additional requirements for a ‘collective consultation’ process. This is a complex area, and is outside the scope of this article, but employers have to keep a running tally of proposed dismissals to make sure they do not cross the line. Collective consultation involves allowing the employees to elect representatives and consulting with them about the redundancy proposals. There is an additional requirement actually to consult over the reason for the proposed redundancies – although this is good practice for individual redundancy dismissals it is not required by law where less than 20 dismissals are proposed. The consultation must last at least 30 days where between 20 and 99 dismissals are proposed, and at least 90 days where 100 or more employees are likely to be affected. Employment tribunals are quick to see through attempts to divide up redundancy programs into smaller numbers – if they are really part of the same process the employer can be forced to pay compensation for failing to consult collectively.
Suitable alternative employment
A critical part of any redundancy process is the search for alternative employment. Although it may be unlikely that there are vacancies at a time of major lay-offs, all employers are obliged to consider the availability of suitable alternative work. Employers should provide full details of any vacancies (including salary, hours, job description etc) so that employees can evaluate the opportunity properly. This extends outside of the employing company across related group companies. Employers should not be too strict in their interpretation of what is ‘suitable’ alternative employment. Even if an alternative post would amount to a demotion (with an associated reduction in pay) it is very easy for an employee to score a point by alleging that he or she would have accepted it rather than face unemployment, and that the dismissal was unfair because it was not offered.
‘Dispute resolution’
Although the dreaded ‘statutory dispute resolution procedures’ are no more (after their repeal on 6 April), a ‘fair’ process is still absolutely essential. Employees must be invited to a meeting to discuss the proposed redundancy, and may bring a colleague or trade union representative in with them. If they are selected for redundancy they must be allowed to appeal. It is helpful to start any process with a detailed timeline including time for an appropriate number of meetings with all employees, before a decision is made. Allow sufficient flexibility for employees to miss meetings, raise objections and request more meetings or information.
Advance planning
These are just a few basics – it is impossible to predict every eventuality for every redundancy situation as each workplace has its own quirks in terms of organisation of employees, reasons for the redundancies and the likelihood of alternative opportunities for employees. What is common to all employers, however, is that detailed advance planning will be invaluable when trying to head off claims for unfair dismissal.