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Employment Law News

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Collective redundancies: new ECJ ruling on how to calculate numbers of redundancies

If employers are proposing to make more than 20 people from a single establishment redundant within a 90-day period, they have to go through onerous collective consultation procedures. But when does the 90-day reference period start and end? In UQ v Marclean Technologies SLU, the ECJ ruled that employers have to look either side of an individual dismissal on a rolling basis to identify the relevant reference period. The reference period will be the period of 90 days which includes the individual dismissal, and which contains the greatest number of redundancy dismissals effected by the employer.

What does the law say?

Collective redundancy obligations originate from the EU Collective Redundancies Directive (the Directive). In the UK, the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) implements the Directive.

TULRCA provides that where an employer is “proposing” to dismiss 20 or more employees within a 90-day period it must consult collectively with representatives of the affected employees. Where 20 to 99 dismissals are proposed, the consultation period is 30 days and where 100+ dismissals are proposed it is 45 days. The employer must also notify the Secretary of State about the proposed dismissals using the HR1 form. A failure to do so is a criminal offence.

When calculating the numbers of proposed dismissals falling within the 90-day period there are some rules which favour employers.

First, TULRCA provides that where collective consultation is already underway in respect of a first batch of redundancies, the numbers in the second batch can be viewed in isolation (assuming there is no evidence of bad faith on the part of the employer). For example, an employer begins collective consultation in respect of 30 redundancies on 1 March 2021 and two weeks later it proposes a further 10 redundancies. Although the employer is proposing to dismiss a total of 40 people as redundant within a 90-day period, it is excused from adding the 30 to the 10, meaning that collective consultation is not triggered for the 10. However, if the employer had not started the consultation process for the first batch, then the proposal to dismiss the 30 remains a “proposal” and should be added to the 10, meaning that collective consultation would apply to all 40 proposed dismissals.
Second, in the case of Transport and General Workers’ Union v Nationwide Haulage Ltd [1978] IRLR 143an Employment Tribunal said that employers do not need to look backwards to count earlier redundancy dismissals that have already taken effect, where further redundancy proposals emerge. The Tribunal said this would “demand the impossible” and that a “proposal” refers to what may happen in the future, not what had already happened.

This latest decision of the ECJ has upset the applecart by suggesting that employers should look either side of an individual dismissal and count all the redundancies occurring within a rolling reference period to assess whether collective consultation is triggered.

What happened in this case?

The facts of the case are simple. UQ worked for Marclean in Spain and was dismissed on 31 May 2018. In June 2018 he brought a claim arguing that his dismissal was one of a number of hidden collective redundancies. Between 31 May 2018 and 15 August 2018 (a 77-day period), a further 36 people left the business. Marclean had labelled the majority of these exits as voluntary resignations. UQ argued this was a sham and that they were really redundancies, meaning collective consultation should have taken place.

The Spanish Court went on to find that at least 30 of these workers had been made redundant. However, the Spanish Court was unsure whether the redundancies taking place after UQ’s dismissal should be taken into account when deciding whether collective consultation had been triggered. It asked the ECJ to rule on whether the reference period ran:

backwards from the date of dismissal;
forwards from the date of dismissal; or
as a rolling 90-day period spanning either side of the dismissal if necessary.

What was decided?

The ECJ noted that the purpose of the Directive was to strengthen worker protection in the event of collective redundancies and that only the third option complied with this purpose.

They ruled that the relevant reference period is the period of 90 days which includes the individual dismissal, and which contains the greatest number of redundancy dismissals effected by the employer – in other words a rolling assessment must be made. If the threshold number of redundancy dismissals is reached at any point across the 90-day reference period, collective consultation is triggered.

What does this mean for employers?

This decision has potentially onerous consequences for employers who choose to stagger waves of redundancies. It means that the employer must look either side of a proposed dismissal – on a rolling basis – to assess whether the threshold of 20 or more redundancy dismissals is reached at any point within that period. Although not explicit in the ruling, this appears to capture redundancy dismissals:

that are at the proposal stage;
for which collective consultation has already begun; and/or
that have already taken effect.

As far as (ii) and (iii) are concerned, this represents a change to the established approach in the UK and calls into question whether TULRCA complies with the Directive.

This will require very careful analysis and planning by employers to ensure that they do not accidentally cross the threshold over a rolling 90-day period. Were this to happen, the employer would be tied to a collective consultation period of either 30 or 45 days (in addition to an individual period of consultation) before the first dismissal can take effect. This will extend the life of the employment relationship, potentially triggering entitlements to bonuses or share options that the employer may not have accounted for. The alternative is to dismiss in breach of the collective consultation obligations and face protective award claims of up to 90 days’ gross actual pay per affected employee

Further, employers will need to ensure that the correct numbers of proposed redundancies are reflected on the HR1 form or risk committing a criminal offence.

UQ v Marclean Technologies SU (the judgment has not yet been published in English)

If you would like to know more or your business needs advice on how to manage a redundancy process please contact Amanda Steadman (amandasteadman@bdbf.co.uk) or your usual BDBF contact.

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Employment Law News

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Can an employer require a potentially redundant employee to go through a competitive interview process for an alternative role?

In the wake of the coronavirus pandemic, some employers will be facing the prospect of reorganising their businesses and making redundancies. Employers in this position should take note of this recent decision by the EAT which highlights the risks of getting the process wrong.

What does the law say?

In the case of Williams v Compair Maxam, the EAT laid down the general redundancy process to be followed by employers who recognised trade unions. In summary, such employers should:

provide as much warning as possible of impending redundancies and consider alternative solutions such as alternative employment (either within the specific undertaking or elsewhere);
consult with the trade union and agree the criteria to be applied for selecting which employees from a pool would be made redundant. The selection criteria should be objective, capable of independent verification and applied fairly; and
consider offering alternative employment.

When it comes to selecting which employees from the pool should be offered alternative employment, subsequent cases have confirmed that a rigorously objective selection process is not required (in the way that it is required when selecting who to make redundant). A degree of subjectivity is permitted.

Where a brand new role has been created, the appointment to that role is likely to require something more like a competitive interview process, in order to test the skills and competencies of the employees against the requirements of the new role. Indeed, in the case of Morgan v Welsh Rugby Union (Morgan), it was accepted that the approach of applying selection criteria to a pool of potentially redundant employees will not necessarily be appropriate where a brand new role has been created.

What happened in this case?

The two Claimants were teachers who were employed by the Council to work at secondary school (School 1). Following a reorganisation of education provision in the area, the Council decided to close School 1 and replace it with a school for children aged between 3 to 18 years of age (School 2). School 1 was to close at the end of the Summer term in 2017 and the School 2 was due to open in September 2017.

The Council did not consult with the Claimants (or their trade union) about the redundancy procedure at School 1 or the recruitment procedure at School 2. Instead, it invited the Claimants to apply for new roles within School 2. However, the “new” roles were substantially similar to their old roles at School 1. The Claimants were interviewed for the positions but were unsuccessful. In May 2017, the Council gave them notice of dismissal by reason of redundancy, with a termination date of 31 August 2017. The Claimants were not offered the opportunity to appeal their dismissals.

The Claimants succeeded in their claims for unfair dismissal. The Employment Tribunal held that the Council’s procedure had been unfair for a number of reasons, including the lack of consultation and appeal, but also the fact that the Claimants had been required to “apply for either an identical job or substantially similar job”. In other words, this was not a Morgan-type situation and the use of a competitive interview process was unreasonable. The Council appealed.

What was decided?

The EAT dismissed the Council’s appeal, holding that the Employment Tribunal had applied the law correctly. Notably, the EAT drew a distinction between the process to be used where:

the previous role is no longer needed and a newly created alternative role available; and
there has been a reduction in the overall number of roles needed but some roles (or substantially similar roles) remain available.

In the first scenario, which the EAT described as “forward looking”, it would be reasonable to use a competitive interview process to identify the candidate best suited to fill the new post. However, in the second scenario, the right approach would be to place all of the “at risk” employees in a redundancy pool and score them according to objective criteria.

In this case, the roles in School 2 had been identical or substantially similar to the roles in School 1 and so a competitive interview process was not appropriate.

What are the learning points for employers?

It remains reasonable for employers to use a competitive interview process to decide who to appoint to a newly created role following a reorganisation. However, there are limitations on when this approach can be used. Where the alternative role is the same or very similar to one performed by the redundant employees, then the fair approach is to apply selection criteria to the employees in the pool. Employers should give careful thought to which approach is right for their situation before proceeding.

It’s also important to remember that even where a competitive interview process is legitimate, this will not necessarily remove the need for consultation with the affected employees about the process. Indeed, in this case, the EAT noted that consultation “may remain relevant” depending on the facts of the particular case.

Gwynedd Council v Barrett

If you would like to discuss any of the issues raised in this article or how BDBF can help your business navigate a redundancy process, then please contact Amanda Steadman (amandasteadman@bdbf.co.uk) or your usual BDBF contact.

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Employment Law News

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Is the spectre of redundancy looming? If so, what should you do?

Redundancies have always been a way of life in the City, but in the current economic climate, when many organisations are merging, some have recruitment freezes and many others are considering the future warily because of the COVID-19 pandemic, being at risk of redundancy, or the spectre of redundancy can be especially worrying.

Follow our tips for dealing with a potential redundancy to ensure you get the best chance of keeping your role, and the best compensation if you do not.

How to prepare yourself for a potential redundancy situation

Do your homework

Check what your contract, company policies, and any relevant collective agreement says about redundancy. They might refer to a right to enhanced redundancy pay (over and above the statutory entitlement) or fixed consultation procedures. If so, make sure that your employer is doing what they are supposed to do. Enhanced redundancy terms for City employees are common and range from a multiple of 2 weeks per complete year of service upwards. Law firms tend to have less generous enhanced terms whereas the traditional banks with unionised workforces tend to be more generous. Also, check bonus, LTIP and share schemes – they might incorporate “good leaver” terms if you are dismissed for redundancy.

Phone a friend

Most employers allow employees to be accompanied at redundancy “at risk” or consultation meetings by a colleague or trade union representative although there is no legal obligation to do so, it’s good practice. If you aren’t told that you can be accompanied at an “at risk” meeting, then ask. If your employer’s notes are inconsistent with your own (or your companion’s), ask your employer to put a copy of your notes on file.

Question time

In order to fairly dismiss for redundancy, your employer should individually consult with you about the redundancy situation, consider alternative ways of saving the role and avoiding the redundancy, enable you to have time to respond, and enable you to apply for different roles within the business. If you have any questions during the consultation process, ask them.
Some key issues to look for (but there are more):
• Have you been told why your role is at risk? Does it make sense?
• Have you been told who else is at risk? Has one of your colleagues been “missed out”?
• Do you think that other people should have been included in the ‘at risk’ pool?
• Do you think that your employer should have considered “bumping” (i.e. removing others from their roles so that you can fill their vacancy)?
• If you are going through a competitive application process for roles, do you know the selection criteria and what other factors (such as past appraisals) are being taken into consideration?
• Do any selection criteria disadvantage you due to your particular circumstances e.g. disability or pregnancy/maternity leave?
• Have you been told about all existing vacancies (including roles that are junior/senior to yours)? Have you been given a fair opportunity to apply for those roles?
• Have you seen the selection criteria for alternative roles? Do you think they are fair?
• Is there a job vacancy that you haven’t been told about?

What are the possible alternatives to redundancy?

We are in exceptional times with the onset of the COVID-19 pandemic. Many businesses are faced with a situation they have not planned for and are reluctantly having to face – the loss of valued, skilled, hard-working employees.

There may well be a genuine downturn in the requirement for you to continue to do your role, but that downturn may be short-lived. You may wish to explore other ways of saving your role such as unpaid leave, parental leave, or taking an unpaid sabbatical. This may be a time for quid pro quo whereby an employer wishing to retain an employee but cannot afford to do so offers a retention payment as a sweetener, payable when revenues return to reasonable levels. This would require both parties having confidence that the employer can weather the storm so that the retention payment is not a promise in the wind. The government has just introduced a new Covid-19 Job Retention Scheme, the operational details of which have yet to published. If your employer intends to access the scheme it may mean that you can discuss being kept on the payroll for 3 further months until 30 May 2020. You will not be required to work for your employer during this period. The employer can reclaim up to £2500 per month per employee to continue to pay you, but does not have to cover the shortfall in your salary.

It’s a numbers game

If your employer is proposing to make 20 or more employees redundant in a period of 90 days, they have additional collective consultation obligations. If they fail to comply with these obligations, you may have an additional claim for up to 90 days’ pay.

Is there another reason?

Employers often view “redundancy” as the easiest way to eject an employee and retain the employees they really want. For that reason, a redundancy process can be used to cloak an unlawful act (such as discrimination or the repercussions of whistleblowing). If this is the case, you may have additional, more valuable claims against your employer beyond a claim of unfair dismissal. If you suspect discrimination or other unlawful acts, or you think that redundancy is being used to “mask” another reason for your exit, make a careful note of anything that is said or done which supports your allegation. This can be used as evidence later down the line.

Appeal

As part of the redundancy process, as a matter of fairness, you should be given a right of appeal. Exercise your right to do so. Make sure your appeal is submitted in time and identifies the specific issues you have with the redundancy process and the decision.

Protected conversations and settlement agreements

In the City, a likely route is for your employer to circumvent the above procedures and offer you a settlement agreement on a confidential basis and ask you to seek independent legal advice on its terms. The written agreement will set out terms that will seek to buy you out of any contractual, statutory and other claims you may have (such as unfair dismissal), by offering you compensation. The settlement agreement will ask you to waive any claims in return for signing the agreement. A standard contribution to legal fees for you to obtain advice on the terms and effect of the agreement is usual. Any negotiations on the terms of the agreement will be confidential and are unlikely to be admissible in any proceedings, unless your employer behaves in a particularly improper manner towards you during the protected discussions.

Brahams Dutt Badrick French LLP are a leading specialist employment law firm based in the City. We are experienced in advising on severance packages arising from redundancy processes and getting clients the best deals whilst protecting their reputations. If you would like any further advice on redundancy and the topics discussed in this article please contact us on 020 3828 0350 or at info@bdbf.co.uk

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Top tips for surviving redundancy

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Redundancies have always been a way of life in the City, but in the current economic climate, when many organisations are merging, some have recruitment freezes and many others are considering relocating, being at risk of redundancy can be especially worrying.

Follow our top tips for redundancy to ensure you get the best chance of keeping your role, and the best compensation if you do not.

Our ‘Top Tips’ for redundancy scenarios

1. Do your homework

Check what your contract, company policies, and any relevant collective agreement says about redundancy. They might refer to a right to enhanced redundancy pay (over and above the statutory entitlement) or fixed consultation procedures. If so, make sure that your employer is doing what they are supposed to do. Enhanced redundancy terms for City employees are common and range from a multiple of 2 weeks per complete year of service upwards. Law firms tend to have less generous enhanced terms whereas the traditional banks with unionised workforces tend to be more generous. Also, check bonus, LTIP and share schemes – they might incorporate “good leaver” terms if you are dismissed for redundancy.

2. Phone a friend

Most employers allow employees to be accompanied at redundancy “at risk” or consultation meetings by a colleague or trade union representative although there is no legal obligation to do so, it’s good practice. If you aren’t told that you can be accompanied at an “at risk” meeting, then ask. If your employer’s notes are inconsistent with your own (or your companion’s), ask your employer to put a copy of your notes on file.

3. Question time

In order to fairly dismiss for redundancy, your employer should individually consult with you about the redundancy situation, consider alternative ways of saving the role and avoiding the redundancy, enable you to have time to respond, and enable you to apply for different roles within the business. If you have any questions during the consultation process, ask them.
Some key issues to look for (but there are more):
• Have you been told why your role is at risk? Does it make sense?
• Have you been told who else is at risk? Has one of your colleagues been “missed out”?
• Do you think that other people should have been included in the ‘at risk’ pool?
• Do you think that your employer should have considered “bumping” (i.e. removing others from their roles so that you can fill their vacancy)?
• If you are going through a competitive application process for roles, do you know the selection criteria and what other factors (such as past appraisals) are being taken into consideration?
• Do any selection criteria disadvantage you due to your particular circumstances e.g. disability or pregnancy/maternity leave?
• Have you been told about all existing vacancies (including roles that are junior/senior to yours)? Have you been given a fair opportunity to apply for those roles?
• Have you seen the selection criteria for alternative roles? Do you think they are fair?
• Is there a job vacancy that you haven’t been told about?

4. It’s a numbers game

If your employer is proposing to make 20 or more employees redundant in a period of 90 days, they have additional collective consultation obligations. If they fail to comply with these obligations, you may have an additional claim for up to 90 days’ pay.

5. Is there another reason?

Employers often view “redundancy” as the easiest way to eject an employee and retain the employees they really want. For that reason, a redundancy process can be used to cloak more sinister acts (even discrimination or the repercussions of whistleblowing). If this is the case, you may have additional, more valuable claims against your employer beyond a claim of unfair dismissal. If you suspect discrimination or other unlawful acts, or you think that redundancy is being used to “mask” another reason for your exit, make a careful note of anything that is said or done which supports your allegation. This can be used as evidence later down the line.

6. Appeal

As part of the redundancy process you should be given a right of appeal. Exercise your right to do so. Make sure your appeal is submitted in time and identifies the specific issues you have with the redundancy process and the decision.

7. Protected conversations and settlement agreements

In the City, a likely route is for your employer to circumvent the above procedures and offer you a settlement agreement on a confidential basis and ask you to seek independent legal advice on its terms. The written agreement will set out terms that will seek to buy you out of any contractual, statutory and other claims you may have (such as unfair dismissal ), by offering you compensation. The settlement agreement will ask you to waive any claims in return for signing the agreement. A standard contribution to legal fees for you to obtain advice on the terms and effect of the agreement is usual. Any negotiations on the terms of the agreement will be confidential and are unlikely to be admissible in any proceedings, unless your employer behaves in a particularly improper manner towards you during the protected discussions.

Brahams Dutt Badrick French LLP are a leading specialist employment law firm based in the City, Canary Wharf and Mayfair. We are experienced in advising on severance packages arising from redundancy processes and getting clients the best deals whilst protecting their reputations. If you would like any further advice on redundancy and the topics discussed in this article please contact us on 020 3828 0350 or at info@bdbf.co.uk.

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Redundancy Guide For Employers

Whether you are looking to reorganise your business to change the structure or skills mix or just reduce headcount, we can support your business if a redundancy situation arises.

We understand that redundancy can be a daunting process and have extensive experience of supporting our clients through what is often a difficult time. Our practical and pragmatic advice will ensure that you are able to achieve the reduction in workforce or restructure that you envisage by following the correct legal procedures to avoid any potential claims.

We set out below our top tips for dealing with redundancy.

Before instigating any kind of redundancy dismissal process, you should be aware that if tested, you would need to satisfy a Tribunal that you have a genuine redundancy situation. Broadly speaking this means that you must either closing a place of work or reducing the number of employees doing work of a particular type. If you are replacing the employee in question, or it is a restructuring which will not result in fewer employees doing work of a particular type, then it is unlikely to be considered a genuine redundancy situation. Employees may have a valid claim against your company if they believe that there was another reason for their dismissal which amounted to discrimination (e.g. pregnancy), or was a result of whistleblowing. With our guidance throughout the redundancy process, we will show you how to avoid this eventuality.

If you are proposing to make 20 or more employees redundant in one establishment in a 90-day period, then you will have additional collective consultation obligations. Employee representatives will need to be appointed if not in post already, and minimum time periods for consultation apply. If you fail to comply with these obligations, your employees may have an additional claim for up to 180 days’ gross pay. Our team are highly experienced in the rules of collective consultation, and will follow best practice to ensure the best possible outcome for your firm.

If employees have more than two years’ service, from the point of view of the Employment Tribunal, they must be consulted with, in order to ensure fairness. You have a duty to warn employees of the possibility of redundancy and consult with them during the process. In the interests of fairness, it is recommended that you enter the consultation period with an open mind, ensuring that no final decision is made until the period has ended.

Where work of a particular kind is ceasing or reducing, you will need to consider carefully which employees to ‘pool’ together as potentially redundant. This will normally involve grouping those who do the same or similar work, but may also include employees who, despite doing different work, have interchangeable skills.

When deciding which employees to select for redundancy, you must ensure that you undertake a comparison of all those in the pool. Your selection criteria should be, as far as possible, objective and capable of verification. You should be very careful to avoid using criteria which puts certain protected groups at a particular disadvantage; for example, a policy of ‘last in, first out’ can (if used on its own) put younger employees at a disadvantage, as they are less likely to have longer periods of service. This could amount to age discrimination.

Bumping is a process whereby you move a potentially redundant employee into a different post and instead dismiss the employee currently performing that role. This can still constitute a fair dismissal and can give your business greater control over which employees are dismissed if used correctly.

Once you have identified the employees who will be made redundant, you should then make efforts to look for alternative employment for them within the company, or associated companies. Failure to do so is likely to give rise to an unfair dismissal claim. You should inform ‘at risk’ employees of all existing job vacancies (including roles that are more junior/senior to the role they are in), and give them a fair opportunity to apply.

If an employee is on maternity leave during your redundancy consultation process, she will have the right of first refusal of any suitable alternative roles. If you fail to offer such roles to her before all others, it may mean her redundancy dismissal amounts to an automatically unfair dismissal claim and sex/maternity discrimination.

As part of the redundancy process, there are advantages to giving your employees a right of appeal. You must ensure that you listen to the employee’s issues and respond to each point they raise.

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Your Brexit strategy – How to deal with redundancy

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The past few months have seen significant upheaval both across the financial markets and politically. The uncertainty has led some businesses to consider relocating to elsewhere in the EU (such as Frankfurt) and many others have ceased hiring as a result of the broader uncertainty in the market.

A role will be redundant if there is: (i) a business closure; (ii) a workplace closure; or (iii) a reduced need for a particular kind of work. So, if a company is relocating and an employee does not want to move, that individual will potentially be redundant. Redundancies will also arise if a drop off in work means that fewer employees are needed in a business.

If the employment contract contains a reasonable relocation clause however, there may be an obligation for the employee to relocate. Overseas relocations are usually by choice, not compulsion.

Employees with two years’ qualifying service are protected from being unfairly dismissed. They can still be dismissed but only if: (i) one of the five statutory fair reasons applies (which includes redundancy); and (ii) their employer follows a fair process.

Redundancy is one of the most ‘employer friendly’ areas of law. However, there are several things that employees who face redundancy should be alive to:

Being a ‘good leaver’

Many employees in financial services receive deferred remuneration such as cash or equity, which will vest over a period of years under LTIPs or other schemes. There is no default position as to what happens to this deferred remuneration when an employee is made redundant; it will be governed by the plans of the relevant scheme. Most plans will have some mechanism for allowing certain individuals (often called ‘Good Leavers’) to keep their unvested remuneration but who is deemed a ‘Good Leaver’ will vary. Favourable leaver status may be negotiable and is worth exploring on an exit.

Compensation

At a minimum, anyone being made redundant must be given notice or paid in lieu of the notice period in their contract. Anyone with two years’ service will also qualify for statutory redundancy pay (which is a fairly nominal sum). However, many larger employers may offer enhanced redundancy payments based on 2-4 weeks’ pay for each complete year of service (which are usually contingent on signing a settlement agreement).

Settlement agreement

A settlement agreement is an agreement in which an employee agrees to waive their potential employment claims against their employer. In a redundancy situation, employers will often ask employees to sign a settlement agreement to draw a line under any liability for the company going forward. However, just because an individual is presented with a settlement agreement, it does not necessarily mean they should sign it. The sums on offer may be significantly less than the value of their potential claims (such as unfair dismissal compensation) to so and legal advice should always be taken beforehand.

Immigration status

If an employee’s right to work in the UK/EU is contingent on a continuing employment relationship with a particular employer, a redundancy situation can become even more stressful. However, non UK nationals may be able to apply for residency in the UK. It is generally helpful to think about a contingency plan sooner rather than later (see our article on immigration status for some helpful advice here).

Bonus

There is no default presumption that redundant employees will be entitled to their bonus. The status of any bonus payment will be governed by the employment contract or another agreement, most of which will contain provisions limiting bonus payments to employees who are in employment and not under notice at the time of termination (which would exclude redundant employees). However, depending on the drafting of this clause, the employee may be able to argue that they should receive a pro rated bonus or full bonus for the year.

Unfair dismissal is not the only claim that may arise in a redundancy situation and the picture on deferred remuneration and bonuses is just as important. Ultimately, where the financial climate is poor, redundancies can fairly be made and there may be no claim that arises from it. However, it helps to have a clear understanding of the process and to understand if there are any pressure points to maximise any legal leverage.

Rolleen McDonnell

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Who counts as ‘redundant’ for the purposes of collective consultation?

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Where an employer in the UK proposes to dismiss more than 20 employees at one establishment in a period of 90 days, they must consult on a collective basis. If an employee resigns in response to a substantial change to their working conditions, they can be counted towards the 20-person threshold.

Between 16 and 26 September 2013 Gestora Clubs Dir SL in Spain dismissed 10 employees, including Mr Pujante Rivera. A further 22 employees’ contracts were terminated within 90 days of that. One of those terminations was a resignation from an employee who objected to Gestora’s unilateral decision to cut her salary by 25%.

Mr Pujante Rivera brought proceedings against Gestora on the basis that they failed to carry out collective redundancy consultation. He argued that the dismissals occurring within 90 days of his own (including the employee who resigned) meant that the threshold for collective consultation (which, in Spain, is 10% of the workforce) was exceeded.

The European Court of Justice agreed with Mr Pujante Rivera. It held that “redundancy” for the purposes of the rules on collective consultation should be construed widely to include the employee who resigned, given that she resigned in response to a change to an essential element of her contract.

Pujante Rivera v Gestora Clubs Dir SL and another (C-422/14)

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Ignorance of need to consult collectively no bar to protective awards

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An employer’s claim that it failed to consult collectively because it was not aware that it was obliged to do so is no excuse, and protective awards (of up to three months pay per employee) remain payable in such circumstances. Further, if an employer has relied on its ignorance to justify non-consultation, it cannot also suggest that special circumstances had rendered collective consultation not reasonably practicable.

A school operated by E Ivor Hughes Educational Foundation was suffering from financial difficulties caused by a decline in pupil numbers. At a meeting in February 2013, the governors recognised the problem and discussed options for how to keep the school open if pupil numbers remained low. Once the actual number of pupils for the next academic year was confirmed in April 2013, it transpired that numbers were worse than predicted. As such, the governors decided that the school would have to close at the end of that term. Three days after that decision was made, school staff were given notice that their employment would end in August 2013. No collective consultation took place.

The staff brought claims challenging their dismissal and the lack of collective consultation. The Foundation argued that the governors had not been aware of the obligation to consult collectively and, even if they had been, special circumstances had meant that it would not have been reasonably practicable for the Foundation to consult collectively. The Foundation identified the special circumstances as (i) that informing staff about the potential need to close the school would have leaked to parents, causing them to remove their children and further affecting the school’s budget; and (ii) the fact that school staff must be given one term’s notice of termination, meaning notice had to be served quickly to avoid having to pay wages for another term.

The Employment Appeal Tribunal held that it was immaterial that the governors were unaware of the obligation to consult collectively, and accordingly upheld the order for the maximum protective award of 90 days’ gross pay. As the order was a punitive measure, it was not linked to the extent of any loss suffered by the staff. It was artificial for the Foundation to argue that special circumstances existed as the governors’ lack of knowledge that they must consult collectively meant they would not have evaluated whether or not they could carry out the consultation. Circumstances identified in hindsight cannot be relied on.

E Ivor Hughes Educational Foundation v Morris and others, UKEAT/0023/15

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ECJ rules that “establishment” for collective redundancy consultation purposes means a local employment unit, not the whole company

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An employer making 20 or more people redundant in a 90 day period in a single establishment must consult on a collective basis. But what is meant by ‘establishment’? The EAT held this meant the entire operation of the employer but the Euopean Court has decided that “establishment” means the local employment unit at which the redundant employees carry out their duties. This means that, for example, employees working in shops with fewer than 20 staff, even if they are part of a large national chain which is also being shut down, are not entitled to be consulted over proposed redundancies.

Woolworths and Ethel Austin, both national retail chains, went into administration. Only those staff who worked in shops with over 20 staff were given compensation for the failure to inform and consult them over redundancies. Those staff who did not receive compensation appealed to the Court of Appeal on grounds that the “establishment” is the entire chain which employed thousands of staff.

The European Court of Justice held that an “establishment” only refers to the local employment unit – in these cases, most likely the individual shops. To construe it more widely would lead to a disparity between the law in different EU member states. The case has returned to the Court of Appeal for determination, though it is next to inconceivable that the result would be anything other than a finding that the employees of the shops with fewer than 20 staff did not need to be consulted.

This decision will be welcome news for large employers with multiple outlets, as it has previously been difficult to see when collective redundancy consultation is necessary.

USDAW and another v WW Realisation 1 Ltd (in liquidation), Ethel Austin Ltd and another (C-80/14)

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EAT held employer’s discretion over pool for selection was very wide but dismissal was unlawful because the employer did not follow its own processes

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Mr Badmos was a regional development manager for Family Mosaic Housing Association. This employer employed five regional development managers, three of which were new business managers and two were delivery managers. Mr Badmos was a delivery manager. In 2009, the Housing Association decided to reduce the number of regional development managers from five to four, eliminating one new business manager. Both sets of managers were treated as having interchangeable skills and so Mr Badmos’ role could be made redundant, despite the fact that his role as delivery manager was not being cut.

Initially, the Housing Association wanted to reduce the number of regional development managers by two, but this was later reduced to one. It was also initially said that all of the regional development managers would have to apply for the new posts but the association later changed their minds on this. It was instead decided that the regional development managers would give an indication of which of the four remaining roles they would like to take on. It was inevitable that more preferences than posts would be received and so it was decided that a selection process would take place to allocate the oversubscribed roles.

When the three new business managers were asked which post they would prefer, two stated that they would like to remain in their existing role, however, the third, did not express any preference. The two delivery managers both expressed a preference to remain in their current roles. It was therefore decided that the third new business manager would be pooled with the two delivery managers and this would become the pool for redundancy selection.

The Housing Association then held interviews with the three employees and scored them according to various criteria. The Housing Association had indicated that the selection process would consist of an application form, interview, work based tasks and psychometric testing. However, the Housing Association did not have regard to the application form and no psychometric testing took place. On the interview notes it was seen that the interviewing manager had written a number of negative comments regarding Mr Badmos, and that the same manager had written very positive comments regarding the new business manager who was also being interviewed.

Mr Badmos was selected for redundancy. After unsuccessfully appealing this dismissal, Mr Badmos made a claim for unfair dismissal and race discrimination.

The EAT upheld the principle that as long as it can be shown that an employer has applied his mind to the choice of pool, then it will be very difficult for an employee to challenge this pool. Hence, even though the route to formation of the pool was tortuous and a strange choice was made, this did not make the dismissal unfair. The employer lost because of its failure to see through its processes on the selection process such as having regard to the application form and psychometric testing and the prejudice shown the interview notes.

Family Mosaic Housing Association v Badmos UKEAT/0042/13

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An employer cannot pay lower redundancy payments to older staff because they are getting a pension as well

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The Employment Appeal Tribunal found that a council could not rely on a statutory defence to justify an age discrimination claim. Sefton Council paid redundancy payments in accordance with the Civil Service Scheme. This scheme reduced redundancy payments if employees were eligible to draw a pension as it was thought unnecessary to compensate people drawing a pension for loss of a job to the same extent as if they were still in work.

Some no-doubt pension age or close to pension age judges ruled that in the current climate, individuals over 60 remain in the workforce and require income from their earnings and pension to maintain a standard of living, so the reduction in redundancy payment was not justified and Ms Heron got her full redundancy payment.

Detail

Ms Heron TUPE transferred from the civil service to Sefton council. Her entitlement to the Civil Service Compensation Scheme (which was derived from statute) was incorporated into her new contract with the council. At the age of 61, the council made her redundant and awarded her a redundancy package in accordance with the scheme. However, whilst her younger colleagues under 60 received redundancy packages based on their length of service, Ms Heron’s package was capped because of her age. She subsequently brought an age discrimination claim.

The council argued it had not discriminated against Ms Heron because it had awarded her redundancy package in accordance with statute. The EAT disagreed and said that:

whilst the scheme is derived from statute, it does not require different treatment of employees over 60 in terms of redundancy payments (it merely provides for it); and
when Ms Heron TUPE transferred to the council, the scheme rules ceased to be statutory and became contractual. This meant that the scheme could not be justified using the statutory defence.

The council also argued that if it was age discrimination, their decision to pay Ms Heron a lower redundancy package than her younger colleagues was a proportionate means of achieving a legitimate aim, because someone who has reached pension age will be better provided for as they can draw their pension. The EAT disagreed and said that in the current climate, individuals over 60 remain in the workforce and require income from their earnings to maintain a standard of living, so the fact that Ms Heron can draw a pension will not justify age discrimination. Accordingly, Ms Heron was entitled to the balance of the redundancy payment.

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When can an employee refuse suitable alternative employment?

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In Devon PCT v Readman, Mrs Readman was a community matron at Devon Primary Care Trust. Her role was focused on managing community and district nursing in a small community hospital which had only 12 beds.

In 2007, she was placed at risk of redundancy and was offered the role of modern matron, which involved 10% managerial duties, 45% hospital matron duties and 45% as team leader. She rejected this position on the basis that her qualifications were in community nursing and she had chosen not to work in a hospital since 1985 and had no desire to go back. She also wished to emigrate to Canada.

The question which the Tribunal had to consider was: (a) whether Mrs Readman had unreasonablyrefused the offer; and (b) was she entitled to a statutory redundancy payment?

This case went up to the Court of Appeal who held that the Tribunal had failed to address Mrs Readman’s point that she did not want to work in a hospital because her career path was community nursing and the Tribunal needed to look at the relevance of Mrs Readman’s emigration plans. This amounted to an error of law and the case was remitted to the Tribunal for a decision.

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