Can enhanced redundancy packages be implied into a contract of employment by custom and practice?

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Can enhanced redundancy packages be implied into a contract of employment by custom and practice?

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In Park Cakes Ltd v Shumba, four employees worked for a company within the Northern Foods Group until they TUPE transferred to the Vision Group. They were later made redundant and brought a claim for enhanced redundancy payments (equal to double the statutory package plus a lump sum payment of £600). They argued this on the basis that:

  • Northern Foods had a group policy of paying enhanced redundancy packages even though it was not mentioned in their contracts of employment;
  • The enhanced redundancy package is referred to in the Northern Goods HR manual (although not the £600); and
  • There was evidence of giving employees enhanced redundancy packages dating back to 1993.

Irrespective of this, the Tribunal dismissed the claims on the grounds that the policy had not been drawn to the attention of the employees (although it was available on request) and neither had it been shown to have been applied without exception. The Court of Appeal disagreed and remitted the case back to a new Tribunal on the basis that the Tribunal failed to consider: (1) the extent to which the policy may have come to the employees’ attention; and/or (2) the effect of the documents being available on request. We will update you when there is a new judgment.

Helpfully however, the Court of Appeal offered some advice in relation to whether a term has been implied into a contract of employment. The key issue is not whether the employer intended to be bound, but whether the employer’s conduct implied to the employee (on an objective basis) an intention to be bound.

 

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Woolworths decision to be appealed

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Woolworths decision to be appealed

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As reported in our last bulletin, the Employment Appeal Tribunal found that where an employer proposes 20 or more redundancies across its organisation within a 90 day period, it will have collective consultation obligations even if the number of employees proposed for redundancy at each of its sites is fewer than 20. This decision has been appealed by the Government and will likely go to the Court of Appeal.

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Woolworths spurs landmark decision

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Woolworths spurs landmark decision

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Under UK law, a duty to inform and consult employees as a group is triggered when an employer is proposing to make 20 or more redundancies at ‘one establishment’ in a 90 day period. If the duty is breached, a ‘protective award’ can be claimed of up to 90 days’ gross pay per employee.  This appears to be at odds with the European Directive (on which the UK legislation was based) which does not refer to the need for employees being at “one establishment” in order for the consultation obligations to apply.

In 2009, Woolworths went into liquidation making thousands of employees redundant. On behalf of the employees, two unions brought claims for ‘protective awards’ on the grounds that the liquidators had failed to consult with employee representatives ahead of the redundancies.

This case turned upon whether each Woolworths shop was an establishment in its own right. If each shop was not an establishment, then the duty to consult was not engaged in respect of stores with less than 20 proposed redundancies. The Employment Appeal Tribunal ruled that the UK provisions should be interpreted consistently with the Directive and the words “at one establishment” should be disregarded.

Therefore, where an employer proposes 20 or more redundancies across its organisation within a 90 day period, it will have collective consultation obligations even if the number of employees proposed for redundancy at each of its sites is fewer than 20. For example, if an employer was proposing to make 20 employees redundant within a 90 day period, the consultation obligations would be triggered whether all 20 employees are employed at one site or across various sites.

This decision brings about a substantial change with significant consequences for employers with multiple sites.  In order to avoid the risk of expensive collective claims, employers need to ensure that redundancies across the business are monitored centrally and, where necessary, that the collective consultation redundancy obligations are met.

 

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More good news for Employers about redundancy…

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More good news for Employers about redundancy…

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In Malekout v Ahmed and others (t/a The Medical Centre) the Tribunal was satisfied with an employer’s decision to dismiss an employee for redundancy despite the fact the employer had recruited his replacement months before the dismissal.

Mr Malekout was employed as a Practice Manager at a medical practice for 14 years. In April 2008, Mr Malekout informed his employer that he had been offered another job and wanted to discuss his employment. The practice hired a second practice manager, Mr Kader, on a short term basis to ensure it was not left in a difficult position should Mr Malekout leave. Mr Malekout subsequently decided not to leave the practice but in the interim period much of his work was passed to Mr Kader and various shortcomings in Mr Malekout’s performance came to light. Ultimately, the practice decided that it only needed one practice manager and dismissed Mr Malekout by reason of redundancy. Mr Malekout claimed unfair dismissal.

The Tribunal found that there was a genuine redundancy situation because at the time of the dismissal, the practice had two practice managers and only needed one, but there was no genuine consultation so the dismissal was unfair. However, they also decided that Mr Kader’s shortcomings would have been exposed at some stage and his dismissal was therefore inevitable. As a result his compensation was reduced by 100%. The Employment Appeal Tribunal upheld this decision.

On the facts, it is difficult to avoid the conclusion that the employer manufactured a redundancy process in order to dismiss an under-performing employee. However, once again, it is clear that Tribunals are not keen to look behind a redundancy situation.

 

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Redundancy trumps poor performance

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Redundancy trumps poor performance

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In Fish v Glen Golf Club, Mr Fish was the secretary of a golf club. In 2008, he was made redundant as part of an attempt to improve the club’s financial position.  He disputed his redundancy arguing that the real reason for his dismissal was because the club was critical of his performance.

He relied on the hasty consultation process and the appointment of his deputy to an alternative role as evidence of a sham redundancy. He also cited as evidence the fact that there were two versions of a redundancy report, an edited version (which Mr Fish was shown during consultation) and an earlier unseen version (which was only provided during the litigation process). The earlier version was critical of Mr Fish whereas the edited report omitted these criticisms and was even complimentary.

Notwithstanding this evidence, the Tribunal found that the principal reason for Mr Fish’s dismissal was redundancy albeit that it was not necessarily the sole reason. The criticisms of Mr Fish were background to the dismissal and not the cause of it and therefore the dismissal was fair. Mr Fish appealed this decision on the grounds of perversity. He was unsuccessful as it could not be said that the Tribunal’s decision would ‘cause astonished gasps from the well informed observer’ which is the high hurdle for proving perversity.

This is a surprising decision and one wonders whether a different Tribunal would have taken the same view. Nonetheless, the case is a firm reminder that a Tribunal will rarely look behind an employer’s reasons for making a redundancy and is yet another nail in the coffin for unfair dismissal claims based on redundancy.

 

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