Redundancies, the legal hand grenade

Barry Warne, employment partner at hlw Commercial Lawyers in Sheffield, says, that with the maximum penalty for unfair dismissal now at a staggering £65,300 - with no upper limit if the employee can prove discrimination too - this is not a process you want to get wrong. Article by Barry Warne, Employment Partner at hlw Commercial Lawyers.

Making life simpler - voluntary redundancies When you have decided that you need to let some staff go, make life easier by inviting volunteers first. If this option would leave the right skills in the business, the need to make compulsory redundancies is avoided and claims are far less likely. Bear in mind that you do not always need to offer enhanced payments to attract volunteers.

“You are not legally obliged to seek volunteers, but it is good practice and conducive to healthy industrial relations. However, saying “no” to a volunteer but then making someone else redundant can be very dangerous”

You are not legally obliged to seek volunteers, but it is good practice and conducive to healthy industrial relations. However, saying “no” to a volunteer but then making someone else redundant can be very dangerous. You will need to justify this course of action with sound reasons, for example by showing that the volunteer is markedly better, in a measurable way, than the person you are making redundant. Or that the pair do totally different jobs, and that the volunteer is not in a role which needs staff reductions.

The redeployment of staff
You should also consider whether there is any opportunity to redeploy staff you have provisionally selected for redundancy. You have a legal duty to consider redeploying those at risk into existing vacancies, before advertising them elsewhere. It is therefore extremely unwise to recruit at the same time as shedding labour, and if you do this, you must proceed with caution. The only time this course of action is ever acceptable is if you are recruiting staff with totally different skills from those of the people you are making redundant.

If you do find a suitable new role for a threatened employee within the company, they are entitled by law to a trial period of four weeks to see if they like the job, before being bound to accept it. However, if you cannot find them a position, you must give them adequate paid time off to look for work elsewhere.

Consultation periods for collective redundancy
If you are potentially losing between 20 and 99 people at one location, you are legally obliged to have a consultation period of at least 30 days. This period rises to 90 days where the total is 100 or more. Where these large numbers are involved, it could therefore actually be some time before you can reduce headcount. Bear in mind that even if some people are likely to be redeployed, rather than leave the business, they still count towards your total figure.

Any employee affected by redundancy should have an “employee representative” who will conduct the consultation process on their behalf. These representatives are either trade union officials or, in non-unionised staff, volunteers elected by those affected. If no one comes forward, but you have taken all possible steps to ensure this happens, you will be obliged to consult with staff directly. This can be tricky if you have a limited HR capacity or employee numbers are high, so consider bringing in external consultants to conclude the process within a reasonable timeframe. Don’t forget that representatives may fall sick or leave the business during the process, so it is therefore sensible to have a back-up plan.

With collective redundancies you must also send a copy of the HR1 form to the Secretary of State. Failure to do so is an offence, and you could incur a hefty fine. However many staff you are letting go, you must make sure you explain the situation, that you are available to answer questions and that you give people adequate time to consider their options. This should ideally be at least seven days, even if the group at risk is less than 20 people. Finally, don’t hesitate to seek legal advice if the issues are not clear cut.

Dos and don’ts of the consultation period
It is tempting to rush into the consultation period, to get the ball rolling. At hlw, however, we strongly recommend careful planning of the number affected and the selection criteria. This consultation period is a crucial time in the redundancy process. It therefore must not be rushed and you must not pre-select individuals before consultation. It is designed to be a two-way procedure, so with collective redundancies you will make proposals, and receive feedback on them, via the employees’ representatives. You will be expected to discuss ways of minimising or averting redundancies “with a view to reaching agreement” and if agreement cannot be reached, you should keep evidence that you considered fully all feedback received.

For smaller numbers of redundancies, the consultation process need not be so elaborate. However, you should still inform those at risk of why they may lose their jobs, and how and when the selection will be carried out. After selection, you should give each individual an opportunity to comment on the reason why he or she has been chosen. You should also build in a right of appeal against dismissal, and bear in mind the requirements of the ACAS booklet “Redundancy Handling”.

“Trying to argue that having an honours degree is important when selecting labourers for redundancy, would not cut much ice with an employment tribunal, because such a qualification is not relevant to the job”

Careful planning of selection criteria
Getting selection criteria right is a key part of negotiating the legal minefield of redundancies. It is crucial that you are able to justify why a particular person is losing his or her job. This means your reasons must be objective, measurable and relevant.

For example, trying to argue that having an honours degree is important when selecting labourers for redundancy, would not cut much ice with an employment tribunal, because such a qualification is not relevant to the job. You should also avoid subjective criteria, such as attitude or personality, as these are not measurable. Measurable criteria include disciplinary records, attendance records, relevant skills and qualifications and length of service. Good record keeping will prove invaluable when justifying selections.

An excellent example of a selection criterion which could not easily be attacked at a tribunal, is measured output. For example, a manufacturing client of hlw is able to assess employee performance using computerised technology, which records the level of output achieved by each worker, as well as the number of substandard items produced. With this technology, performance can be measured with great accuracy and this would assist any redundancy selection decision which might have to be made.

People holding unique posts
Employees in unique posts are more vulnerable. Once an employer has decided it can manage without a post (such as a finance director) the holder of that position is at risk of redundancy without further selection. This is different from people doing similar work, who are selected from a pool according to specific criteria.

Out of sight but not out of mind
It is important not to forget about absent employees, such as those off sick, on maternity leave or even on holiday. They must be consulted like anyone else, by telephone or by letter. An effective way of doing this is to hold a meeting of all those at risk, and explain the situation to them, preferably followed by confirmation in writing. Absent employees should at least be invited to this meeting and they should be sent the same written materials. Remember, you should not make anyone on maternity leave redundant until the end of their period of absence, and, even then, you must take great care. Maternity returners have special rights to existing vacancies.

Support mechanisms
Some caring employers arrange out-placement counselling for those losing their jobs, to help them find new employment. This is a useful service to offer, but there is a cost involved. Do not underestimate how much of an impact redundancies can have on the morale of remaining team members. If you are not sure how to move forward positively, you might want to consider consulting a change management expert. By investing in the remaining members of your team like this, you can help ensure that productivity is affected as little as possible.

The knotty issue of compromise agreements
A compromise agreement is a settlement contract which stops an employee bringing a claim on termination of employment. It is only binding if the employee has had independent legal advice, normally paid for by the employer. If you are making a fair redundancy, with valid selection criteria, you should not need a compromise agreement. However, if there is some doubt about whether you have chosen the right person or consulted properly, these agreements can give useful protection. Be aware that it can be difficult to suggest to an employee that he or she should sign up to such a deal, without this carrying the implication that due process has not been followed.

The bigger picture
This is a complex area of law and it is vital that the process is undertaken correctly. The last thing you want to do is trigger industrial action or tribunal claims, especially when finances are already tight. People whose jobs are at risk will be scared, and nothing fuels fear more than lack of information. Communicate with your employees throughout and allow the representatives sensible access to those affected. With proper advice, you should be able to negotiate the minefield successfully.

Created on: 28-Jun-11 13:07
By: Barry Warne, employment partner - hlw Commercial Lawyers

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