Redundancies and restructuring the workforce
The Coronavirus Job Retention Scheme (CJRS) has been extended until 30 April 2021. Unfortunately, despite this, employers may already or shortly be considering making changes to their workforce, including redundancies.
Making redundancies or restructuring your staff is difficult for both business owners and employees. Understanding the law and planning the process carefully are key to a successful redundancy process.
Changing terms and conditions of employment
It is worth considering whether you could obtain the cost savings you need without needing to go through a redundancy process. This could be, for example, by seeking to change employees’ terms and conditions of employment.
An employer can only change terms and conditions if allowed to under the employment contract (for minor changes), or by consent of employees. Imposing changes without the contractual right or the employees’ consent could give rise to risk of claims including breach of contract or constructive dismissal. However, in the present climate, employees may be more likely to consent if they believe it may save jobs.
If employees refuse to consent, you may need to consider dismissing and offer re-engagement on new terms. You will normally have to rely on “some other substantial reason” as the potentially fair reason for dismissal in these circumstances, and demonstrate you have a “sound business reason” for wanting to change terms and conditions. You will also need to follow a consultation process to try to obtain consent before deciding to dismiss.
Under case law, factors that may determine the reasonableness of an employer’s actions include:
- the employer’s motive
- the employees’ reasons for rejecting change
- whether reasons for change were clearly communicated
- whether there was genuine consultation
- whether the majority of employees accepted change.
If you are considering redundancies within the workforce, you will need to bear in mind that for a redundancy dismissal to be fair, there must be:
- a genuine redundancy situation; and
- a fair procedure leading to the redundancy dismissal.
A fair procedure is likely to include:
- individual consultation
- a fair selection process, which will include deciding on a selection pool and objective selection criteria
- the right to be accompanied
- consideration of any alternative vacancies
- a right of appeal.
Placing employees at risk of redundancy should only be considered if no alternatives are available, such as:
- a recruitment freeze
- reducing agency or temporary staff
- offering sabbaticals or unpaid leave
- offering reduced hours
- keeping employees on furlough.
You must consult with employees who are at risk of redundancy. Before COVID-19, this was normally done in person. For an employee who is furloughed or self-isolating, consider meeting by video conference or phone.
The process could look like this:
- day 1 – the employee is placed at risk of redundancy at the first consultation meeting
- days 4 –7 – second individual consultation meeting
- days 10 –14 – final individual meeting where redundancy may be confirmed
You must consult on ways to avoid the need for redundancy, and any suitable alternative employment. As part of the individual consultation, you must also disclose the individual’s score (if applicable) and how that score was arrived at. You should give the individual the opportunity to challenge their score.
You should be prepared to be flexible on the timing of the consultation process. Further meetings may be required if there are suggestions about how to avoid redundancy to consider, or if the employee applies for alternative vacancies within the company or the group.
If you are proposing 20 or more redundancies in one establishment within a 90 day period, additional collective consultation obligations apply. Legal advice should be sought in those circumstances.
Potential risks in a redundancy process
Some of the most common areas of risk for employers when carrying out a redundancy process include:
- Stating an employee is “redundant” before their redundancy is confirmed – loose language may be used against you. You should state that the employee is at risk of redundancy and that you are in consultation with them before making a final decision.
- Failing to provide lists of any other vacancies you may have in your organisation.
- Failing to get the pool ‘right’ first time.
- The alleged bias of assessors (we recommend that you use at least two assessors if your organisation is large enough).
- Failing to provide copies of selection criteria and scores.
- Previous appraisals being inconsistent with the scores on a skills matrix.
- Failing to offer an employee on maternity leave a “suitable available vacancy” if one exists.
- Allegations of discrimination on the ground of a protected characteristic – in particular, failing to make reasonable adjustments regarding the selection process for employees with a disability.
- Standard redundancy letters being inconsistent with what actually happened at consultation meetings.
- Failing to provide a written statement of redundancy calculation (this may amount to a criminal offence).
Generally speaking, employees must have two years’ service to claim unfair dismissal in an Employment Tribunal. However, it is important to remember that in some circumstances, no qualifying service is required.
Legally, you will need to show that you have acted reasonably throughout. Hopefully, following a fair procedure will also mean any redundant employees feel that they have been treated fairly at a difficult and emotive time for all involved.
Originally posted 15 September 2020. Updated 22 December 2020.
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©2020 SCRASE LAW LTD. THIS POST IS FOR GENERAL INFORMATION ONLY AND IS NOT ADVICE. YOU ARE RECOMMENDED TO SEEK COMPETENT PROFESSIONAL ADVICE BEFORE TAKING ANY ACTION ON THE BASIS OF THIS POST