EMPLOYMENT LAW TRAINING AND EMPLOYMENT LAW CONSULTANCY

Section Two
 

The Law in More Detail

Article One. Redundancy dismissal procedures after 6 April

The repeal of the statutory dispute resolution procedures on 6 April 2009 means that an employer's procedural failures in carrying out a dismissal no longer result in the dismissal being deemed automatically unfair. From now on, most dismissal procedures will be subject to the new Acas Code of Practice on Discipline and Grievance - but the Code does not apply to redundancies. This article, explains the law that governs procedural fairness in redundancy from 6 April and the impact this will have on compensation for unfair dismissal in a redundancy context.

Introduction

Before the introduction of the statutory dispute resolution procedures in October 2004, procedural fairness in redundancy dismissals was determined solely by reference to rules established by case law. The statutory procedures introduced by the Employment Act 2002 - which applied to redundancy dismissals as much as to any other type - changed all that by introducing statutory minimum standards of procedural fairness in dismissal. Although the ordinary principles of fairness in dismissal continued to apply alongside the statutory requirements, the sanctions attached to the statutory procedures meant that, for many employers, the focus shifted away from general fairness to consideration of whether formulaic minimum procedures had been complied with.

The procedures were intended to reduce litigation by encouraging parties to resolve disputes in the workplace, rather than proceeding straight to an employment tribunal. Unfortunately, they had the effect of accelerating the litigation process in many cases, with both parties seeking legal advice at an earlier stage to ensure compliance. Given the draconian consequences for failing to comply - including employees being denied access to a hearing of their claim and employers facing a finding of automatically unfair dismissal for technical procedural failings and a consequent possible increase in compensation of up to 50 per cent - this was, perhaps, hardly surprising.

On 6 April 2009, the statutory procedures were repealed by the Employment Act 2008 and replaced by the new Acas Code of Practice on Discipline and Grievance. The Code's provisions will be taken into account by tribunals in determining the procedural fairness of most dismissals and an unreasonable failure to observe the Code's requirements may lead to an increase (or reduction) in compensation. However, the Code does not apply to redundancy dismissals. Thus, for redundancies, the guiding principles of procedural fairness will be those that applied before 2004.

Procedural fairness

As stated above, the statutory procedures have now been repealed. Under that regime, where an employer contemplated dismissing fewer than 20 employees as redundant, he had to follow the three-step Statutory process. (Employers contemplating 20 or more redundancy dismissals within 90 days were obliged to go through collective consultation procedures instead of the statutory dispute resolution procedures - see below under ‘Collective consultation'.)

This involved:

Step 1: setting out in writing the circumstances that led the employer to contemplate dismissal, i.e. the redundancy situation, and inviting the employee to a meeting to discuss it

Step 2: holding a meeting, having first informed the employee of the basis for the redundancy and allowing the employee a reasonable opportunity to consider his or her response

Step 3: giving the employee the opportunity to appeal against the decision taken at the Step 2 meeting.

These procedures were only intended to provide a minimum standard and so compliance did not make a dismissal automatically fair. The ‘ordinary' unfair dismissal provisions in S.98 of the Employment Rights Act 1996 still applied on top of the statutory procedures. However, where an employee with at least one year's service was dismissed and the DDP was not completed owing to the employer's failure to comply with any of its requirements, the dismissal would be rendered automatically unfair - no defence possible.

The statutory procedures were repealed on 6 April 2009. The key consequence of this is that, from now on, procedural failures can no longer result in a dismissal being deemed automatically unfair.

Fair procedure after 6 April

The Employment Rights Act sets out how a tribunal should approach the question of whether a dismissal for redundancy - or indeed for any of the six potentially fair reasons - is fair. This requires the tribunal to consider whether the employer acted reasonably in treating that reason as a sufficient reason for dismissing the employee. The tribunal must have regard to the circumstances of the dismissal, including the size and administrative resources of the employer's undertaking. The abolition of the DDPs means that, in unfair redundancy dismissal cases where the employer starts the process leading to dismissal on or after 6 April 2009 tribunals must rely primarily on pre-2004 case law to determine what constitutes a fair redundancy procedure.

The leading case is Polkey v AE Dayton Services Ltd. There, the House of Lords established that procedural fairness is an integral part of the reasonableness test. In the words of Lord Bridge, ‘the employer will not normally act reasonably unless he warns and consults any employees affected or their representative, adopts a fair basis on which to select for redundancy and takes such steps as may be reasonable to avoid or minimise the redundancy by deployment within his own organisation'. Thus, the Polkey decision sets out the core elements of procedural fairness in redundancy.

'No difference' rule

Polkey also ended what had become known as the ‘no difference' rule. Previously, where there was a proven procedural irregularity in an otherwise fair dismissal - e.g. failure to consult before a redundancy - but it could be shown that carrying out the proper procedure would have made no difference, the tribunal would be able to find the dismissal fair. The House of Lords overturned this rule in all cases, except those where it would be ‘utterly useless' or ‘futile' to carry out the omitted procedure.

Following the demise of the statutory procedures, the Polkey decision will return to the fore in redundancy cases. It will thus no longer be possible for an employer to invoke the ‘no difference' argument when defending a failure to adopt a fair procedure, except in cases where following the required procedure would have been futile. Following 6 April 2009, there is no prescribed minimum and hardly any scope for ‘rescuing' a procedurally unfair dismissal. Unless there is absolutely no possibility of avoiding dismissal, the safest course will be for employers to go through the full redundancy procedure in all cases, no matter how inevitable the eventual outcome may seem.

Individual Consultation

As made clear in Polkey, the employer's obligation to consult employees as part of a fair redundancy procedure is very much a part of reasonableness. In the Polkey ruling, Lord Bridge's view was that dispensing with consultation would be ‘exceptional' and, in practice, it has tended to be allowed only where the employer has been bound to operate under some measure of secrecy.

Subject of consultation

If consultation is generally expected of an employer, the inevitable question arises: consultation about what? To some extent, the subject-matter will depend upon the specific circumstances, but best practice suggests that it should normally include: (i) an indication (i.e. warning) that the individual has been provisionally selected for redundancy; (ii) confirmation of the basis for selection; (iii) an opportunity for the employee to comment on his or her redundancy selection assessment; (iv) consideration as to what, if any, alternative positions of employment may exist; and (v) an opportunity for the employee to address any other matters he or she may have.

Case law indicates that concern over the adequacy of consultation is likely to be particularly acute if an employee is left in the dark until too late a stage in the redundancy process. The Acas advisory booklet ‘Redundancy handling' states that it is good practice for employers to consult at an early enough stage to allow discussion as to whether the proposed redundancies are necessary at all. Further, the consultation process should precede any public announcement of the redundancy programme and the issue of termination.

It is important to note that the scope of the duty to warn and consult extends only to those employees who are the target of the proposed redundancy. An employer will not be penalised for failing to consult an employee at an earlier stage if the employee was not at risk of redundancy at that time but only becomes so as a result of subsequent knock-on effects of the original redundancies.

Collective consultation

The employer's duty to consult in respect of collective redundancies is contained in S.188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A), which states that ‘where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be affected by measures taken in connection with those dismissals'. S.188 goes on to set out details of when and how that consultation must be carried out.

Fair selection

Consultation was the first element of a fair redundancy procedure identified in Polkey. ‘A fair basis on which to select for redundancy' was the second. If an employer adopts unfair selection criteria, or applies them in a subjective or otherwise unreasonable way, not only is there a breach of the procedural requirements, the basic premise that redundancy is the reason for dismissal is undermined. It could also open up the possibility of discrimination claims.

Alternative employment

The consideration of alternative employment for the employees selected for redundancy will often be an important part of a fair and reasonable redundancy procedure. An employer should do what he can so far as is reasonable to seek alternative work for an employee facing redundancy. This does not mean that he is obliged by law to enquire about job opportunities elsewhere, and a failure to do so will not necessarily render a dismissal unfair. In certain circumstances, an employer may be excused a failure to make efforts to redeploy employees rather than make them redundant. However, as a general rule, tribunals will expect an employer with sufficient resources to take reasonable steps to alleviate the effects of redundancy, including giving detailed consideration to whether suitable alternative employment is available.

Again, it was established in Polkey that the potential for deployment of redundant employees within the organisation is something that the reasonable employer will consider. More recently, the EAT suggested that an employer's responsibility does not necessarily end with drawing the employee's attention to job vacancies that may be suitable. The employer should also provide information about the financial implications of taking up any vacant alternative positions. A failure to do so may lead to any later redundancy dismissal being found to be unfair.

Compensation

The repeal of the statutory procedures will have a significant impact on compensation following a finding of unfair redundancy. When the statutory procedures were in force, failure to comply by either the employer or the employee could lead to an adjustment of up to 50 per cent in the compensation awarded in a resulting tribunal claim. These penalties are no longer applicable in cases where the redundancy dismissal process starts on or after 6 April 2009 (subject to the transitional provisions).

ACAS 2009 Code of Practice

The repeal of the statutory procedures by the Employment Act 2008 has been accompanied by the publication of a new Acas Code of Practice on Discipline and Grievance. (www.acas.org.uk) In an attempt to move away from the formulaic and prescriptive requirements of the statutory procedures, while still maintaining an incentive to resolve disputes in the workplace rather than through litigation, tribunals have been given power to adjust compensation in a successful tribunal claim by up to 25 per cent to reflect a party's unreasonable failure to follow the Code.
The foreword to the Code of Practice states that it does not apply to dismissals due to redundancy. This makes sense, given that the Code is framed in terms of misconduct and, to a lesser extent, capability, making it inapt to deal with the particular requirements of a redundancy procedure. Employers should therefore be entitled to assume that they are unaffected by the Code's requirements in carrying out a redundancy procedure.

Transitional provisions

The statutory procedures will still apply to redundancy dismissals occurring on or after 6 April where the ‘trigger event' occurs before the cut-off dates set out in the Order. Employers cannot, therefore, wash their hands of the statutory procedures on 6 April - the procedures will make their presence felt for many months yet, as claims make their way through the tribunal and appeal process.

It is important for employers to establish which regime applies to redundancy procedures that straddle 6 April. The consequences of getting it wrong are potentially significant, as a failure to observe the DDP where it applies exposes the employer to the risk of a finding of automatically unfair dismissal and an increase in compensation

Article Two - A Practical Guide to Voluntary Redundancies

Voluntary redundancy generally describes situations where an employer decides it needs to make redundancies and asks for volunteers. Usually, if there are insufficient numbers, the employer will decide who to make redundant on a compulsory redundancy basis. There is no legal obligation on an Employer to seek volunteers prior to compulsory redundancies, but it would be a reasonable policy to adopt.

In limited circumstances it is possible for employment to be terminated by mutual agreement between employer and employee, which would mean that there is no a dismissal at all. However, in practice such cases are rare; the safer approach is to regard termination of a volunteer for redundancy as a dismissal rather than termina-tion by mutual agreement.

This means that staff dismissed after volunteering for redundancy will be entitled to the greater of their statutory or contractual notice period or to payment in lieu. Those with two complete years' service will also be entitled to a statutory redundancy pay-ment at least.

Also, those with one complete year of service will be eligible to claim unfair dismissal - the fact that an employee volunteered does not prevent a tribunal from hearing an unfair dismissal claim. But realistically, provided the employer has provided all the relevant information to inform their decision on whether or not to volunteer, an employee who does so and later claims unfair dismissal is unlikely to succeed.

Information

Information that should be provided includes the reasons behind the redundancy situation; the affected pool; the selection method that will be used for compulsory redundancies; the number of redundancies anticipated; and how redundancy payments and other entitlements will be calculated.

There is no one set of procedures that must be followed for seeking volunteers, but it is a process that should be handled carefully. This is because of the eligibility to claim unfair dismissal, and also to ensure that nothing that happens in the voluntary redundancy process impacts on the fairness of any later compulsory redundancies.
Those at risk of redundancy should be given as much warning as possible. A good starting point in a voluntary process is to notify all of the staff in the pool from which compulsory redundancies are likely to be made that they are at risk, and to ask for volunteers from that pool.

There is no reason why the individual or collective consultation process required for compulsory redundancies cannot occur during the same period that volunteers are asked to come forward - in fact this is common practice. Potential volunteers should be given the same opportunity for consultation as all other 'at risk' staff.

Discrimination

It would not be sensible to offer voluntary redundancy only to those within the pool who are likely to be selected for compulsory redundancy if there are insufficient volunteers. Doing so would give those who do not take up the offer and are then selected an easy argument on unfair dismissal. They could say their selection was predetermined, and that the selection and consultation exercise prior to their compulsory redundancy was not a genuine one.

Subject to any indirect discrimination arguments there is no legal principle preventing an employer from offering accepted redundancy volunteers an enhanced redundancy payment, but those who are selected for compulsory redun-dancy their statutory and contractual entitlements only. Offering enhanced payments as a sweetener may well remove or reduce the need for compulsory redundancies.

It is recommended that any enhanced redundancy payments be calculated in the same way as statutory redundancy payments to avoid age discrimination claims. It may be sensible to ask outgoing staff to sign compromise agreements in exchange for enhanced redundancy payments - the additional cost of compromise agreements is often more than balanced out by the benefit of the clean break that they provide. Indirect discrimination is a potential pitfall if, through a process of seeking vol-unteers and then making compulsory redundancies, a disproportionate number of employees in a protected group are disadvantaged. Discrimination is unlawful on the grounds of sex, race, disability, sexual orientation, religious belief, and age. The best way to tackle this is to review the process for both voluntary and enhanced redundancies before you start and, while it is ongoing, to try to identify whether there is a disparate impact on a protected group, and ways to alleviate or justify it.

Communications

Communications about voluntary redundancies should clarify that volunteering means that an employee will be considered, but does not have an automatic or contractual right to redundancy. There is no need to offer the right to appeal against a refusal of voluntary redundancy.
Finally, if an employee volunteers and then changes their mind before notice is given, this should be acted on by not making the employee redundant on the basis of their previously having volunteered - but they could still be selected in any subsequent compulsory redundancy selection exercise

KEY POINTS

Article Three - Flu Pandemic Preparation

This article was submitted by Mel Ashworth of First Class Training and
Development (www.firstclass-training.co.uk)

For full details of their Pandemic Preparation Workshop, contact
Mel on 01789 551 665 with or e-mail her at mel@firstclass-training.co.uk

A flu pandemic could be on the way; in fact we're in the middle of the first wave. Any second wave will probably hit in October-December 2009

H1N1 is a very mild strain of the virus. So far there have only been limited fatalities in the UK and most involve an underlying health complication. Let us hope it stays that way.

However, if the virus mutates, and reappears in the winter, one threat to businesses could be an unprecedented rate of absence.

Not just those infected, but those affected: people unwilling to come to work, caring for sick, or parents looking after children when schools close etc.

Absentee rate could be anything from anything from 30 - 50%, for anything up to four months, with individuals being off work for several weeks.

However, with sensible strategies planned in advance your business can be better placed to survive.

Here are some things First Class learning and development suggest you think about :

Plan for the potential impact

Plan for the impact on your employees and customers

Establish and review policies to be implemented during a pandemic

Allocate resources to protect people during a pandemic

Communicate to educate your employees