CHAPTER ONE – SURVEYING THE TERRAIN
Let’s stand back and see where the law relating to redundancy in the workplace has sprung from and when.
Before we look at that context, when making any redundancies, there are five key employee rights. These are:
- Contractual rights.
- Statutory Rights: Redundancy Payments.
- Statutory Rights: Employment Rights Act and the Right not to be Unfairly Dismissed.
- Statutory Rights: Right to have collective representation and negotiation.
- Statutory Rights: Right not to be Discriminated against.
Contractual Rights
I was born in 1965. Statutory employment rights have been around all of my life.
Statutory employment rights have not been around for all of my parents’ lives. My parents were born in 1933 and 1934 respectively.
Whilst technological advances and economic cycles have been with us since well before Jethro Tull invented his seed drill back in 1701 and tulips became an investment fad, the law relating to the impact of a changing workplace has only really developed since the 1960s.
Prior to the 1960s rights in the workplace were mainly governed by the contract. There was the rather patriarchal, upstairs downstairs, Downton Abbey-esque concept of Master and Servant.
Up until the 1960s, there was a free market for labour. But the market was lightly regulated. The only key rights employees had when their employer deemed the employee surplus to requirements, or redundant in modern parlance, were contractual ones. The employers wrote and write the contract.
The key contractual right on termination was to notice. Within the contract employees will have a term governing how much notice in terms of weeks or months their employer must give to terminate the contract.
One of the key payments in a redundancy exercise is a payment in lieu of notice or payment for a notice period.
Other contractual rights can include enhanced redundancy payments.
Statutory Rights: Redundancy Payments
The 1960s saw a sea change. Not only did Bob Dylan go electric, but it was recognised that to compete the UK economy needed to re-structure. Politicians saw that re-structuring would be painful and that employees had few rights.
Parliament acted to reduce the pain to employees by giving them workplace rights to minimise the impact of the economic re-structuring.
Recognising that “the white heat of technology” would leave scorch marks on inefficient and over-resourced sectors of the economy, Harold Wilson, the prime minister, passed the Redundancy Payments Act 1965 onto the statute books.
The Redundancy Payments Act 1965 [RPA] gave a method of calculation for redundancy payments as well as definitions for what amounted to a redundancy situation.
Those definitions and methodologies have largely survived.
The original sections of the RPA dealing with definitions and calculations for redundancy payments have been transposed into later legislation, currently the Employment Rights Act 1996.
Some provisions of the RPA have not survived the march of progress and have been made redundant as changing attitudes make them obsolete.
For example, under the 1965 Act women were not entitled to a redundancy payment if they were dismissed as redundant after the age of 60, the age for men being 65.
The age limits have themselves been made redundant. Now any employee, however old, will be entitled to a redundancy payment if they meet the qualifying conditions.
Employers were originally reimbursed the cost of a redundancy payment by central government to encourage employers to become more productive by shedding unproductive employees. The RPA was not only a way of giving employees a soft landing if they lost their job, the re-imbursement provisions actually incentivised employers to bite the re-structuring bullet.
The right to employer reimbursement disappeared after 1979.
The right to a redundancy payment is a cornerstone right for UK employees. The law is well established, reasonably well understood, and there are very few disputes about an employee’s entitlement to a statutory redundancy payment.
Statutory Rights: Unfair Dismissal
1971 saw the Industrial Relations Act come into force which introduced the concept of unfair dismissal.
The right not to be unfairly dismissed is the second cornerstone right for UK employees.
Redundancy is a potentially fair reason for dismissal.
Despite the law on unfair redundancy dismissal being relatively static, claims for redundancy unfair dismissal are still widespread.
Practitioners may be cutting corners, acting in ignorance or making mistakes, leaving many employees to bring claims for unfair dismissal arising out of their redundancy dismissal.
Leaving aside the time and cost involved in defending a claim, there is also reputational risk both within and without the organisation if you are seen not to treat employees fairly.
Statutory Rights: Discrimination
The mid-1970s saw the UK joining the European Economic Community, the EEC, later known as the EU.
Joining the EEC meant the UK had to abide by the rules of the club which are set out in the founding treaty, the Treaty of Rome.
One of the key rules of the club is that member states have to implement EU rules, known as directives, within 2 years of those rules being passed by the European Parliament.
Some of those rules have dynamic effect. One of the rules was that the UK could not have any law in place which treated men and women in a discriminatory way.
It took until the mid-1990s for the law to recognise that the requirement under the redundancy payment legislation was discriminatory. Part time employees defined as those who work fewer than 16 hours per week on average had to have five years service compared to full time workers who only had to have two.
Based on workforce surveys, it was found that far more women than men worked part time and the differing service requirements were indirectly discriminatory. Those requirements were removed.
In the 1970s the Race Relations Act and the Sex Discrimination Act passed into law.
Pretty much all of the discrimination law has been consolidated into one statute, the Equality Act 2010.
Practitioners have to be alive to discrimination and bias intruding into their decision-making process during a redundancy exercise.
The right not to be discriminated against for having a protected characteristic is the third cornerstone right.
The protected characteristics are:
- Age.
- Disability.
- Gender reassignment.
- Marriage and civil partnership.
- Pregnancy and maternity.
- Race.
- Religion or belief.
- Sex.
- Sexual orientation.
That’s right readers, discrimination law covers everybody. We all have at least 3 of those protected characteristics each.
There are a number of different types of discrimination employees and workers are protected from and have the right not to suffer.
The key concept is that discrimination is “prohibited conduct.” Conduct prohibited under discrimination law includes:
- Direct discrimination – treating an employee or worker less favourably because of a protected characteristic. In redundancy that means discriminating against an employee by selecting him or her for redundancy because of a protected characteristic.
- Indirect discrimination – applying a practice, provision or criterion that adversely impacts employees with a particular protected characteristic. Possible prohibited conduct could be part time employees in the pool being selected ahead of full-time employees, or older employees being selected ahead of younger employees.
- Duty to make reasonable adjustments for employees and workers with disabilities to ensure that a criterion, provision or practice does not put an employee or worker at a substantial disadvantage. Adjustments could be made to the pool or in determining who is offered alternative employment that is available.
- The requirement for an employer not to treat an employee or worker less favourably because of something arising in consequence of a disability. Typically, this means disregarding disability related absence when scoring an employee for redundancy.
- Harassment is subjecting an employee or worker to unwanted conduct that has the purpose or effect of creating an intimidating, hostile, degrading, or offensive environment for the employee or worker. Harassment can come into play during a redundancy exercise. For example, a female employee may reject her line manager’s sexual advances, that line manager allows that rejection to taint his scoring of that employee during a redundancy exercise.
- Victimisation is treating an employee or worker less favourably because the employee or worker has committed a protected act. Protected acts are:
- Bringing a claim under the Equality Act 2010. That is self-explanatory. If an employee is suing their employer for discrimination, the employer cannot pick on the employee during a redundancy exercise.
- Giving evidence in a claim under the Equality Act 2010. Again self-explanatory as (a).
- Doing any other thing for the purposes of or in connection with the Equality Act 2010. That’s a pretty big catch all but will cover grievances about discrimination, even if they are not couched formally as contraventions of the Equality Act 2010.
- Making an allegation (whether or not express) that the employer or an employee has breached the Equality Act 2010. As above at (c).
Those paying attention will notice that the right not to be discriminated against covers more than just employees, it covers agency workers as well as workers, typically consultants who are engaged by the employer.
Discrimination is a very live issue in the workplace and in society. The evidence shows that there are glass ceilings, that certain sections of society are not reflected and represented at the higher echelons of organisation’s management.
In 2022 of all the FTSE 250 companies, just 4.8% were held by women. 6% of FTSE one hundred business have no board member who is from a BAME background.
Law firms and the judiciary are not the most diverse organisations.
As financial risks, unfair dismissal has a compensatory award capped at a year’s salary or around £105,707.00, whichever is the lower.
Discrimination claims have uncapped compensatory awards. Successful Claimants could be awarded 6 or 7 figure awards, if a Claimant has lost a job through discrimination and has then suffered substantial losses.
Practitioners should keep an eagle eye out for potential discrimination issues. Often decisions about employment or continued employment is taken at a sub-conscious level. Line managers appoint or retain in their likeness, thereby reinforcing existing structures. One key case in Equality Law is King v Great Britain China Centre [1992] ICR 516 where Neill LJ astutely observed that discrimination was often based on an assumption that someone “would not fit in,” and that evidence of discrimination was not always available as “discriminators rarely admit discrimination, even to themselves.”
The law on discrimination has developed over the years. In particular the law recognises that discrimination exists but evidence of discrimination may not always exist in a tangible and clear way.
The days where landlords could advertise a vacant property with a sign saying “No dogs, blacks or Irish” are thankfully long gone. Whilst the signs may have gone, the thought processes behind the signs are still present in a minority of people.
The law therefore can draw inferences that discrimination has taken place. An inference can be drawn where there is less favourable treatment, a difference in protected characteristic and where the explanation for the treatment is unsatisfactory or lacks cogency or credibility.
Statutory Rights: Collective Rights
The fourth cornerstone right is the collective rights of trade unions and employee representatives to play an active role in redundancy proposals where twenty or more redundancies are planned.
Again, these laws have been around since 1971, are reasonably well known and well established. Collective rights still present a major risk to HR Practitioners.
The reason why they present a risk is that the award for a failure to comply with the requirements is a punitive award against the employer. An employer may be made to pay up to ninety days pay per employee in favour of a group of employees whom have not received proper consultation through their representatives, either elected or trade union.
Collective rights of consultation are mandatory where twenty or more employees are being dismissed at one establishment in a ninety-day period.
Typically, an employer will have to consult collectively where a site is closing.
We will cover collective rights to consultation in a later chapter.
So, we can see that during a redundancy exercise an employer has to be alive to a whole host of risks relating to employees’ rights.
In essence these rights are all about treating employees fairly during the exercise. If the mindset is fairness and treating employees how the practitioner would like to be treated then the risks should mitigate themselves.