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Making the right decision to avoid an unfair dismissal claim during redundancy

Published: 

Mon 7 October, 2019

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When an employer is considering redundancies it is a difficult time for all concerned and getting it wrong can prove costly.

Employees may be automatically unfairly dismissed for reasons of redundancy if selection for redundancy was unfair, or the employer does not act fairly in the circumstances.

If the employee then submits a successful claim to an employment tribunal for unfair dismissal they can receive financial compensation (1).

To make a claim for unfair dismissal an employee must, have been continuously employed for two years, claim within three months of dismissal and not fall under excluded categories

The current compensation rate for unfair dismissal is made up of a basic award, based on the age of the employee and length of service, and a compensatory award, which is meant to compensate the individual for on-going financial losses that result from the dismissal.

The basic award is worked out based on a ‘week’s pay’ that is ‘capped’. This cap is reviewed each year and is currently set at £525 (from April 2019) (2).  The compensatory award is currently capped at the lower of 52 weeks' pay or £86,444 (from April 2019), but it is worth pointing out that in most successful cases the award does not come close to this.

In a redundancy situation an employee can make a claim for unfair dismissal even if the reason for the dismissal (redundancy) is a fair one. Such a claim can be because the process conducted was procedurally unfair or redundancy was not the real reason for the dismissal.

If an employer is planning to make redundancies there are certain procedural requirements they must adhere to in order to avoid a dismissal being found to be unfair (3).

In planning for redundancies key considerations will be when, where and how the redundancies can be best made. Deciding in advance or at an early stage, which employees will be made redundant can make a dismissal unfair.

Alternatives to dismissal should also be taken into account for example are there other suitable roles for any worker who is at risk of redundancy.

Some employees may opt to take voluntary redundancy. Problems will usually arise when there are not enough volunteers and management will have to select workers.

In such situations a fair and objective selection criteria must be used. Common criteria will include skills, performance and disciplinary records. Each employee in the redundancy pool is scored against each of the criteria and the employees with the lowest scores are selected for redundancy.

Some selection criteria are automatically unfair. You must not select an employee for redundancy based solely on a protected characteristic, which includes age, disability, religion sex or sexual orientation will not only be unfair it will also be discriminatory (4).

Earlier this month an Irish telecoms company was ordered to pay over £48,000 (€55,000) to a former director of marketing over making her redundant when she was five months pregnant. (5)

Employers can use discretion when drawing up what criteria to use, with the aim of retaining staff that are most valuable to the organisation. Absence on maternity leave, pregnancy-related absence and disability-related absence should all be discounted if absence is included as a criterion for selection.

Even when a fair process has been conducted there is a pitfall employers still need to be wary of.

Alternative employment should be considered for potentially redundant employees to ensure a fair redundancy procedure. All possible vacancies should be considered and if an alternative becomes available it should be offered. A failure to offer an alternative role may mean a dismissal is found to be unfair.

If an employee refuses an offer of suitable alternative employment, they will lose their entitlement to a statutory redundancy payment if the refusal was unreasonable.

References:

1.Unfair dismissal [Internet] castleassociates.org.uk [cited 30.9.19] https://castleassociates.org.uk/support-centre/what-unfair-dismissal

2.Award cap [Internet] citizensadvice.org.uk [cited 30.9.19] https://www.citizensadvice.org.uk/work/problems-at-work/employment-tribunals-from-29-july-2013/employment-tribunals-valuing-a-claim/employment-tribunals-basic-award/employment-tribunals-how-to-work-out-your-basic-award-if-you-are-claiming-unfair-dismissal/

3.Redundancy procedures [Internet] acas.org.uk [cited 30.9.19] https://beta.acas.org.uk/manage-staff-redundancies

4.Protected characteristics [Internet] equalityhumanrights.com [cited 30.9.19] https://www.equalityhumanrights.com/en/equality-act/protected-characteristics

5.Company ordered to pay £48,000 [Internet] irishtimes.com [cited 30.9.19]  https://www.irishtimes.com/business/retail-and-services/telco-must-pay-55-000-to-director-laid-off-while-pregnant-1.4014928

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