Providing an insight into the legal issues of re-employment after redundancy, Steve Willey, HR & Employment Law Consultant at Last Cawthra Feather, (LCF) comments.
“The logic here is obvious – the payments are tax-free because they are compensation for redundancy. If the employee is quickly re-employed, it begs the question as to whether the position was truly redundant in the first place. Whilst the employee will ultimately be responsible for any tax deemed to be due, under PAYE, the employer will be called on to pay in the first instance and then face having to recover the amount in question from the employee. “It is also worth noting that if a redundant employee is re-engaged within four weeks of being made redundant, and the offer of the alternative position is made before the existing one ends, they will not qualify for a redundancy payment and their service will be unbroken. “The more obvious, and often much greater risk, is the potential for claims of unfair dismissal.
“It is unlikely that a dismissed employee who is then re-engaged will make a claim of unfair dismissal. However, it is not impossible for them to do so. The payment of a statutory redundancy payment breaks their continuity of service, and so there will be a dismissal in law, and the chance to claim unfair dismissal. Quite what their losses will be if they have been taken back on after only a short break is open to debate, but if they are re-engaged at a lower salary they may claim for the difference. “A further risk is that other people made redundant at the same time may see the re-employment of one worker as evidence that the exercise was “rigged” and make unfair dismissal claims. This could be avoided by offering any vacancy to all former employees who had been made redundant in the most recent round. However the employer may not view other candidates as suitable, or may have some other reason for wanting to bring a particular person back. Whilst this might be understandable, there are clearly risks if the appointment process is not transparent.
“The riskier course of action is to recruit following a redundancy exercise and not specifically offer the vacancies to former employees. This will be ramped up if redundant employees apply for the new position(s) and are unsuccessful. “Regardless of the fairness of the original redundancy process, employees who are not re-engaged may well claim that no true redundancy ever existed. If an Employment Tribunal agrees with them then their dismissals will be unfair.
“To defeat such claims the employer has to show that there was a genuine redundancy situation at the relevant time, and that since then events have taken place which could not have been foreseen at that time. “Typical things which might fall into this category include the unexpected placing of a significant order, the demise of a competitor, the arrival of a new investor or business partner, and so on. “The key is that this event should not have been anticipated at the time redundancies were carried out. The employer will need, if challenged, to be able to demonstrate that they could not have known about the future event at the relevant time.
“Quite obviously such situations crop up on a regular basis and, just as frequently, redundant employees will be sceptical if they see their former employer taking on new staff. The key is linkage; if there is no evidence of a link then unfair dismissal claims will fail, assuming there are no other issues with the terminations. “Employers should always take advice before recruiting close to a redundancy exercise. Recalling that the limitation period for unfair dismissal claims is three months, if recruitment takes place outside that limit, the employer will generally be safe. Inside it they will need to check how well the evidence of a lack of linkage stands up.”