The Importance of a Proper Redundancy Process

A recent employment case highlights the importance of following the correct procedure in a redundancy situation where an employee could claim the contrary.

Mr O’Connor worked for East London NHS Foundation Trust, and was informed in March 2017 that his role as a Psycho-Social Intervention (PSI) Worker would be deleted. Mr O’Connor received a letter from the Trust confirming that it was “likely” he would be issued with a formal notice of redundancy, and inviting him into a meeting to discuss suitable alternative employment.

Mr O’Connor began a trial period as a Care Co-ordinator, at the end of which both parties disagreed as to the suitability of the role and he was dismissed in December 2017. The Trust refused to make a statutory redundancy payment on the basis that they considered his employment to have ended when his statutory trial period ended. Mr O’Connor’s view was that he was not given notice of termination and was dismissed on the grounds of redundancy and thus, entitled to statutory redundancy pay.

The Tribunal decided that the Trust did not follow the redundancy procedure correctly as, although the Trust put Mr O’Connor on notice that a notice of redundancy was likely to be forthcoming, confirmation of his dismissal in fact never materialised. Mr O’Connor was therefore entitled to a statutory redundancy payment.

The Redundancy Process

Whether you are an employer or employee, ensure that you are following the correct steps to comply with a fair procedure. Redundancy can potentially be a fair reason for dismissal, and can occur where for example, the business is closing down, the business needs to make cuts or the role will no longer exist.

Redundancies can be collective (i.e. 20 or more redundancies) or they can be individual. Where there is a collective redundancy, employers are obliged by statute to inform and consult appropriate representatives, and to notify the Secretary of State in the Department for Business, Energy and Industrial Strategy (BEIS).

The following steps should be taken where there is a collective redundancy as the employer must still consult individually with the employees:

Staff meeting

First and foremost, employers should schedule a meeting with their staff to inform them of the proposed redundancies. Whilst this will never be a pleasant experience, it is vital that employers make this announcement, not least to prevent any potential rumours going around in the workplace. Employers should ensure that staff are informed of the following:

• the reasons for redundancy
• the numbers expected to be dismissed
• who is in the pool of employees at risk
• the length of the consultation period
• the process of selection, including the criteria for assessment and the timetable
• the right of appeal
• opportunities for redeployment
• that there will be individual consultation and further open meetings

This should also be an opportunity for employees to ask any questions. Note that where there is a collective redundancy, there are specific timelines upon which employers should start the consultation process. Where 20 – 99 dismissals are proposed, the consultation must start at least 30 days before the first of the proposed dismissals, however if there are 100 or more dismissals, it must be 45 days before the first dismissals.

Letters to individual employees

As soon as the initial staff meeting has taken place, employers should inform individual employees in writing that they are at risk of redundancy. This letter should briefly set out the reasons for the redundancy and confirm the selection criteria. The letter should flag to employees that they should also consider whether, if they were selected for redundancy, they would be happy to agree any changes to their role, such as relocating or taking a pay cut. Alternative positions should also be offered to employees and the appropriate trial period should apply. All employees should be aware of their employment status at the end of the consultation period, whether employed, redundant or on a trial for a new position. Further staff meetings should be held if necessary.

Carry out a fair selection process

Employers commonly use a selection matrix to ensure that a fair selection process is carried out; common criteria used by employers include skills, performance and disciplinary records. An objective view should always be taken when measuring employee scores against such criteria and the lowest scores should be selected for redundancy. It is also worth remembering that employees with less than two years’ service cannot claim unfair redundancy so employers may want to bear this in mind, albeit they must be careful not to inadvertently open themselves up to claims of discrimination, for example if an employee with less than two years’ service is pregnant.

Consider alternatives to redundancy

Whilst this is not an absolute necessity, it is good practice for employers to always consider ways to avoid redundancy. There are a number of cost-saving measures which employers should explore such as reducing overtime, cutting wages or removing discretionary benefits.

Hold consultation meetings

Within the consultation period, employers should hold individual and collective consultation meetings with their employees. These meetings would be an opportunity for the employer to explain in detail their reasons for coming to this decision and, conversely, an opportunity for the employee to question, challenge or comment upon the decision or the process in reaching the decision. Employees should be open to agreeing changes to their roles or indeed offering up their own suggestions to make the process easier. These consultation meetings should be kept confidential at all times and a record of these meetings should be sent to the employee, setting out what was discussed. There may be specific requirements for your situation, so it would be prudent to seek legal advice as soon as possible to ensure you are following a fair procedure.

Issue notices of dismissal

Where, at the end of the consultation period and after the employer has considered all comments and suggestions and have explored all ways to avoid redundancy, a letter must be sent to the selected employee with notice of the dismissal. This letter should set out the process that was followed, as well as confirmation of any entitlements such as notice pay, holiday pay, etc. The letter should also offer the employee an opportunity to appeal the decision, together with information on how to make that appeal.

If it is appropriate, a draft settlement agreement should be given to the employee which sets out the principal terms of the offer in relation to the redundancy. Employees will require independent legal advice on this agreement in order for the waiver of their rights to become legally enforceable, the fee for which is generally contributed by the employer. Where legal advice is not obtained, there are instances where an unhappy employee could still attempt to bring a claim against the employer notwithstanding having signed the agreement.

As an employer, the key things to remember when carrying out a redundancy procedure is to always keep your employees informed and updated with the process, and ensure that you have a good reason for making redundancies. This would serve to minimise, insofar as possible in what is already a difficult situation, the risk of employment claims arising. Employees should challenge anything that they do not understand or agree with, whilst keeping an open mind to options which may be offered by the employer. As can be seen, it is important that a fair and proper procedure is followed in order to minimise the risk of potential claims being made against an employer.

If you have any queries or if you are currently involved in a redundancy situation, A City Law Firm would be delighted to assist you.