Archive for the ‘Redundancy’ Category

When faced with difficult trading conditions employers often prefer to make their employees take a pay cut rather than make them redundant, but can an employer impose a pay cut on its staff?

Changes to employment terms (including those relating to pay) can only be made with the agreement of the employee. If an employee objects to new terms the options available to the employer are to accept that it is bound by the existing terms or to dismiss the employee. Where a dismissal takes place the employer may need to demonstrate that the dismissal was fair as was the case when a Mr Booth brought a claim for unfair dismissal against his former employer, Garside and Laycock, arising out of his failure to accept a pay cut.

In this case the EAT held that the question that had to be asked was whether it was reasonable for an employer to dismiss an employee for refusing to accept a pay cut. The question as to whether it was reasonable for the employee to accept a pay cut, thereby avoiding dismissal, was not relevant to that decision.

The case has been remitted to a fresh tribunal who will have the task of deciding whether, on the evidence put before it, Garside and Laycock acted reasonably in dismissing Mr Booth. The tribunal is likely to hear evidence as to whether any other cost-saving measures could have been taken, thereby avoiding the need to dismiss Mr Booth.

Case reference: Garside and Laycock Ltd v Mr T G Booth

It is easy to see why Garside and Laycock took the decision to make their employees accept a pay cut rather than make them redundant since it is a cheaper and less unpleasant and disruptive process.  However, it is also a risky process, which should not be embarked on lightly as there is a chance that the dismissal would be held to be unfair. This is the case even where the employer offers to re-employ the employee on new terms, although in such circumstances the employer will have a strong argument that the employee has failed to mitigate their loss by not accepting employment on the new terms.

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Why it is important to word dismissal letters carefully

In this case an employee was dismissed for redundancy with 4 days notice. Her contract of employment in fact entitled her to 3 months notice of dismissal. The letter of dismissal stated that payment would be made of statutory redundancy pay, holiday pay, and an ‘ex gratia’ payment of a sum equivalent to 3 months’ gross salary.

The employee brought a claim for damages for dismissal without notice. The employer argued that the ‘ex gratia’ payment, which had been paid, was meant to be a payment for the notice period. The EAT disagreed and upheld the Tribunal’s earlier judgment.

The reasoning behind the EAT’s decision was that an ‘ex gratia’ payment is ordinarily understood to mean a gift or payment made by favour as opposed to a payment made on account of any legal obligation. There was nothing in the dismissal letter which cast doubt on this interpretation – the letter could have explained that the ‘ex gratia’ payment was actually her notice payment but it did not.

Case reference: Publicis Consultants UK Ltd v Ms F O’Farrell.

The employer in this case clearly did not understand the meaning of the term ‘ex gratia’ and, therefore, the case serves as a cautionary reminder not to use  Latin unless you know exactly what it means!

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Job insecurity is at its highest since the recession started and staff morale is at its lowest since records began says the CIPD in a UK employment law and HR poll of over 200 employees.

21% of employees in the private sector think their employer is planning redundancies while that figure soars to 58% in the public sector; 29 % in the voluntary sector and 10% in the private sector.

For those employers who do plan to make redundancies it is advisable to speak with a UK employment law expert first as there is a procedure that must be followed in order to avoid unfair dismissal claims.

Even if employers don’t plan to make redundancies in the short term, they will benefit by addressing low staff morale and engendering a sense of job security wherever possible because the poll also found that the percentage of staff looking for a new job also increased from 19 to 24 per cent overall.

In UK employment law and HR terms, the risks and costs associated with hiring replacement staff makes it well worth the time spent on keeping the staff you already have. More on this story from TAEN the organisation that specialises in Age and Employment.

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The answer will depend on whether there is some overlap between the roles and/or whether or not the remaining post will pick up some of the orphaned tasks after the other job has been made redundant.

If so, there is a need to place both employees in the pool even though only one job is at risk and even though both jobs have different titles/levels of seniority.

Job titles shouldn’t dictate who is in the redundancy pool. Answers to the question ‘who does what?’ are far more important.

If there is a significant overlap between two or more employees’ workload then it would be unfair to place only one of them in the pool.

If employers are seeking to make cost savings by cutting a senior role and require the junior role to pick up some of the slack, and/or the senior employee could do the junior role, then discuss the pool with the affected employee before you make a decision.

If the senior employee is willing to accept the reduced pay and benefits package attached to the junior role then you can apply the practice known as ‘bumping’ where the first employee (whose post is made redundant)  ‘bumps’ a second employee out of their role so that the second employee is made redundant instead of the first. It seems unfair but it is designed to ensure that organisations can retain the best staff rather than become slaves to procedure.

So, if the senior employee wants to be considered for the junior role, then both the senior and junior employee should be in the pool before you make the senior role redundant.

Fulcrum Pharma (Europe) Ltd v Bonassera (EAT) decided similar facts in November last year and underlined the need for employers to ask employees whether they would consider taking a lower paid post before confirming the ‘pool’. The failure to properly consult over these issues with Ms Bonassera resulted in an unfair dismissal finding against the employer.

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A male employee challenged the special treatment given to a colleague during a redundancy selection and argued that his employer had acted ‘disproportionately’. He claimed that during the firm’s consultation he had been treated less fairly than his female colleague, who was given full marks on certain performance criteria despite being on maternity leave during the consultation period.

This week the Employment Appeal Tribunal agreed with his argument and you can find more case details at The Lawyer.

If employers have to reduce employee numbers and there are at least two employees in the pool, one female on maternity leave and a male colleague, then this case may suggest that employers use proportionate scoring methods rather than awarding the female employee top marks as a knee jerk reaction. More will be revealed as commentaries emerge in coming weeks.

Quite the opposite was happening in this case of redundancy selection for reasons of maternity where bosses decided a woman with young children wouldn’t be able to ‘put in the hours’ required by the job!

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An investment banker claiming £13.5 million after she was made redundant following maternity leave has won her case for sex discrimination. The tribunal found bosses made assumptions about her ability to work and travel as a young mother, claiming during redundancy consultations that she would not be able to “put in the hours”.  The tribunal concluded: “Had … a fair procedure been adopted in redundancy selection it is more than likely she would have retained her job.”  The irony of this case is that the claimant was only promoted to Vice President after she had told them she was pregnant!  Read the full story on This is London  http://www.thisislondon.co.uk/standard/article-23865944-banker-seeks-pound-135-million-after-losing-her-job-because-of-baby.do

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BBC News – Legislation to cap civil service payouts expected. If this had been there own company there is no way they would have agreed to give 6 years pay for redundancy packages. It is scandalous that tax payers money is frittered like this. I wonder if the decision is open to judicial review?

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The Duchess of York has unceremoniously sacked her staff to save £60,000 per month in salaries…allegedly.  I hope she consulted with them first! Anyway, Fergie is consoling herself with a trip to Richard Branson’s Necker Island. Nice work if you can get it. More

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An employee of ours is on sick leave and I have plans for restructuring which mean her job would no longer exist. Would there be risks attached to restructuring while she is away?

It is advisable to conduct the consultation with the employee when she returns to work, however, if that is impractical then you can conduct the consultation with her while she is on sick leave, but be very careful that you are not selecting this particular employee for reasons of her being disabled. There is no specific period for consultation but it is advisable to ensure that you give her time to respond in writing to your consultation letters.

Redundancy is, in effect, a dismissal and so the employee should be afforded the right to know why you are considering making her job redundant; to discuss the pros and cons of any decision before it is made; to be accompanied by a colleague or trade union official; and to appeal your final decision.

Remember that consultation is a ‘two-way’ process so provide the means for her to respond where appropriate. It’s all about keeping the employee informed and giving her full rights to consultation even though she is on sick leave. It is advisable to send letters by recorded delivery and if you don’t receive a response, try other routes to contact her. Whatever you do, don’t just send a redundancy notice through the post!

Check your Redundancy Managers Toolkit on your ELE web service for different rules where several jobs will be made redundant within a given period.


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