Redundancy: new guide
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Douglas Ainley outlines five principles that employers should follow; the definition of redundancy has been narrowed, he warns
30 THAT they cannot be ac;used of unfair dismissal em)loyers must follow certain 3rocedures when making em3loyees redundant. It is difficult or many employers, especially n small firms, to stay abreast of :he law's requirements, particuarly when revised standards of ;onduct quite regularly emerge From court cases.
However, every employer should be aware of the practical mplications of two recent Emaloyment Appeal Tribunal (EAT) Jecisions. One outlines five prin..11 p les of current industrial D r a ct i ce which employers should follow when selecting 3mployees for redundancy; the 3ther narrows the definition of redundancy and will make it harder for employers to establish that redundancy exists. Let us consider them, dealing first with selection for redundancy.
The 1975 Employment Protection Act requires employers to :Ionsult recognised trade unions 3bout proposed redundancies 3nd tell them why it is being done, the numbers and types of lobs involved, the proposed method of selection and the proposed method of carrying out the redundancies.
Until now an employer's main obligation was to inform rather than agree with union representatives about his proposals. However, the EAT decision in Williams & Others v. Compair Maxam Ltd effectively brings selection for redundancy out from behind management's closed doors. In future, selections will be more closely scrutinised by tribunals and a heavier burden placed on employers to seek agreement with employee representatives on the criteria for selection.
Because of adverse economic circumstances, Compair Maxam had decided to reorganise the company. This involved redundancies and each departmental manager drew up lists of employees to be retained and employees to be made redundant on the basis that staff retained would be those who would ensure the company's future viability. The recognised trade union — APEX — was not informed of how and by what criteria selections were to be made.
The EAT in effect found this totally unreasonable and identified five principles of current good industrial practice by which tribunals should measure an employer's conduct. The principles are not immutable — nor are they rules of law, but you will need good reasons for not observing them when selecting employees for redundancy.
The five principles for reasonable employers are: • 1, Seek to give as much warning as possible of impending redundancies so as to enable trade unions and employees who may be affected to take early steps to inform themselves of the relevant facts, consider possible alternative solutions, and, if necessary, find alternative employment within the company or elsewhere.
• 2, (a) Consult employee representatives as to the best means whereby the desired management result can be achieved fairly with as little hardship as possible to employees, and (b) In particular, seek to agree with employee representatives on criteria to be applied in selecting employees to be made redundant, and (c) When a selection is made, consider with employee representatives whether it was made according to those criteria.
• 3, Whether or not agreement on the criteria to be adopted is so agreed, seek to establish criteria for selection which so far as possible do not depend solely on the opinion of the person making the selection, but can be objectively checked against such things as attendance record, jobefficiency, experience or length of service.
• 4, Seek to ensure that the selection is made fairly according to those criteria, and to consider any employee representations to that selection.
• 5, Seek to see whether, instead of dismissing an employee, alternative employment could be offered.
In the unfortunate circumstances which necessarily attend redundancies the EAT expects employers to do as much as is reasonably possible to mitigate the impact on the workforce and to satisfy them that selection is made fairly and not on whims.
Turning now to the narrower definition of redundancy, you can fairly dismiss an employee by reason of redundancy if your requirements for the kind of work he is employed to do cease or diminish. But what happens if, as a prudent employer, you have provided in your contracts of employment for employees to do other types of work if required? To make them redundant must you also show that your needs for such other work have ceased or diminished?
Unfortunately, yes — according to the EAT's decision in Cowen v. Haden Carrier Ltd Mr Cowen was employed as a divisional contracts surveyor but was made redundant when the company's requirements for a divisional contracts surveyor ceased. However, his employment contract also stated that Mr Cowen would be required to undertake at the company's' direction "any and all duties which reasonably fell within the scope of his capabilities". Mr Cowen argued that he was not redundant because the company also had to show a diminution in their requirements for any other type of work he could have been asked to do.
The EAT reluctantly accepted this argument because they were bound by a previous Appeal Court decision. It means that an employee cannot be made redundant unless you can show a diminution in your requirements for both work which that employee actually did, and any other work he could contractually be required to do.
The practical repercussions of this decision will, as the EAT realised, be considerable and will affect the future approach of tribunals to unfair dismissal claims based on redundancy. It becomes very difficult for employers to establish that redundancy exists.
The EAT expressed the hope that the legal position would soon be changed. Until it is, the value of flexibility or mobility clauses in employment contracts whereby employees can be required to do other jobs or work in different locations, is seriously in doubt.
These two decisions illustrate how hard it is for employers without personnel departments or legal assistance to "get it right" when making employees redundant. It is hard to see how employers can be expected to adhere to standards laid down in recent court decisions. But they must at least try since ignorance_ of the law is no defence.
Since writing this the Court of Appeal has granted Haden Carrier's appeal but the decision turned on the correct interpretation of Mr Cowen's employment contract and it endorsed the strict test for redundancy adopted by EAT.