The Employment Act 2008 – Its effect on redundancy

As we have previously discussed in our article dated 7 April 2009, the Employment Act 2008 has repealed the statutory disciplinary and grievance procedures introduced by the Employment Act 2002. This has had a knock on effect on the law relating to Redundancy.

Background

The Employment Act 2002 created a statutory procedure which needed to be adhered to when dismissing employees. These procedures related to dismissal for redundancy as well as other types of dismissal.  Whilst the purpose of this was to promote the settlement of disputes in the work place the procedures ended up increasing the amount of litigation.

Before the enactment of the Employment Act 2002 procedures for redundancy was based on case law and centred on the fairness of the procedure in the circumstances.

What Changes?

The mandatory procedures for dismissal have now been repealed and are now governed by the ACAS Code of Practice on Discipline and Grievance.

This Code of Practice expressly states that it does not apply to dismissal by redundancy. Rather, it has been designed to apply to misconduct and capability matters.  Accordingly, it is widely believed that the procedure for redundancy will revert back to the position pre-2004 and in particular, the reasonableness test set by the House of Lords case of Polkey v AE Dayton Services Limited 1988 ICR 142.  The test provides that an employer will not have acted reasonably unless;

1. They warn and consult any employee who will be affected by redundancy (consultation);
2. They adopt a fair basis on which to select an employee for redundancy (fair selection);
3. They take such steps as may be reasonable to avoid or minimise redundancy (alternative employment);

It will then be for the Tribunal to consider whether, in applying the above criteria, the employer acted reasonably in dismissing the employee for reason of redundancy.

Consultation

This is an essential element of determining whether a redundancy procedure is unfair.  The employer should consult and inform the employee on the following points;

1. Informing the employee that they have provisionally been selected for redundancy;
2. Confirming the basis of their selection;
3. Provide an opportunity for the employee to comment on their selection;
4. Consider any alternative employment
5. Give the employee the opportunity to address any concerns they may have.

Fair Selection

It is essential that an employee is selected fairly for redundancy. If it is concluded that theemployee has been unfairly selected for redundancy the decision to terminate for reason of redundancy will be undermined and the dismissal found to be unfair.

An employer should choose their selection criteria (experience, length of service, disciplinary record etc) which will form the basis of the redundancy procedure.  The selection criteria should form part of the consultation with the employees who should be given the opportunity to comment on the criteria and where possible, agreement should be sought. This prevents challenges on the basis the criteria was unfair from those who are ultimately selected.

Alternative Employment

An employer who is seeking to make redundancies should always consider whether there is any suitable alternative employment which the employee who is selected for redundancy can be employed in.  An employer should also consider whether there are any business decisions which can be made (i.e. reducing overtime, pay freezes, short working week) which will diminish the need for redundancy.

This process should also be communicated with the employee and agreement should be sought.

Transitional Provisions

As with the disciplinary and grievance procedures there will be a period of overlap between the old and new procedures.  The basic position is that if the intervening act takes place before 6 April 2009, the previous procedures will need to be followed.

Summary

Whilst the Employment Act 2008 has repealed the statutory procedures and introduced the new ACAS Codes of Practice.  These Codes of Practice specifically state that they do not apply to redundancy situations therefore the procedure for redundancy returns to the law that most employers and employees will be used.

The main effect of the Employment Act 2008 therefore is that an employee who is dismissed for redundancy using an unfair procedure will not be deemed to have been automatically unfairly dismissal.

For further information please contact Steven Meyerhoff on 01254 828 300 or at steven@backhouses.co.uk