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Redundancy and COVID-19

25th June 2020

The Coronavirus Job Retention Scheme (CJRS), introduced during the earliest stages of the lockdown stopped the likely wave of insolvencies and redundancies it would have inevitably triggered.

According to government figures, 1.07 million employers had already claimed through the scheme by 31st May, to the tune of £17.5 billion. The future looks less positive however, with the very real threat of large and wide ranging redundancies looming over the UK economy.

There is a perception that businesses will wait until the furlough scheme ends to make redundancies, with many believing that employees cannot be made redundant whilst on furlough.

The reality however is that employees can be made redundant, and can serve any notice period during the furlough.

We anticipate that we will see more employers beginning to take such decisions from August 2020 as the rules on the CJRS change, and employers are required to begin making payments towards the costs of the furloughed employees.

It also appears that some employers feel the unprecedented circumstances of the pandemic free them from the legal obligations central to the redundancy process; this is not the case.

Whilst there may be some practical difficulties involved in arranging aspects of the redundancy process such as consultations, the law surrounding those processes is still very much in place and   employers must continue to demonstrate that there is a genuine redundancy situation.

Reasons for Redundancy

Redundancy situations will typically be triggered by a reduction in the work that needs to be done, or the need to close a certain aspect of the business to ensure survival of the rest, and that the reduction in employment needed cannot reasonably be met by other means.

The other possible options could include unpaid sabbaticals, granting requested statutory parental leave, or changes in terms and conditions, such as a switch to flexible working, job sharing, a reduction in working hours (with an associated pro-rata pay decrease), or pension contributions (provided always that they remain within the statutory requirements now in place) and the removal of non-contractual benefits, and/or if applicable voluntary redundancies.

The viability of any or all of these options may depend upon existing contracts of employment and the willingness of employees to accept any changes. For many businesses though, these steps are unlikely to be enough to deal with the situation, and redundancies will be the only option.

Under section 98 of the Employment Rights Act 1996, redundancy is one of the recognised fair reasons for dismissal, but a strict process must be followed to protect employers from future claims of unfair dismissal (and potentially other claims too). This process includes consultation, fair selection of employees, the consideration of alternatives to redundancy, and the right of appeal for employees. A redundancy consultation should not be viewed as a tick box exercise; employers should bear in mind at all times that the purpose of it is to seek to explore options to avoid compulsory redundancies.

If the redundancy is challenged, an employer must be able to objectively explain why it was deemed necessary, when the support of the CJRS was still available. This makes the timing of the redundancy critical and employers should remind themselves of the notice period which applies to each circumstance.

If an employer is planning on making 20 or more employees redundant during a single 90 day period then they have an obligation to consult collectively, as set out in the Trade Union and Labour Relations (Consolidation) Act 1992.

In some cases an employer may have to allow extra time for the election of an employee representative, which can take place remotely. It should be noted that an employee or trade union representative will be allowed to carry out the work of representing the employees whilst on furlough.

If more than 20 employees are made redundant in a 90 day period, the employer must also inform the Secretary of State for Business, Energy and Industrial Strategy.

During the consultation period, an employer must provide the employee representative with certain information, including:

  • the reason for the redundancies
  • the number and type of employees facing redundancy
  • the total number of employees of that type within the business
  • how the individuals being made redundant will be selected
  • the period over which the redundancies will take place
  • how the redundancy pay will be calculated

Making the Selection

Having decided that a redundancy situation has arisen, a decision will need to be made as to which employees are to be in the affected pool from which those to be made redundant should be selected. It is advisable to avoid pools of one, if possible.

The selection of which employees will be made redundant must be based on objective criteria, such as attendance, skills and experience, disciplinary records, length of continuous employment etc.

The fact of the proposed redundancies should then be announced to all affected members of staff, with the caveat that no decision will be made without full consultation. Letters should then be sent to the employees involved in possible selection pools telling them of the risk of redundancy.

As well as collective consultation, employees should be consulted on a one-to-one basis during which they will be given information on how the selection process will work, how the redundancies will take place, the period over which the whole process will be carried out, and how they have become provisionally selected. It will allow the employees opportunity to engage with the process, challenge anything that may be incorrect, and make proposals as to possible alternatives to redundancy.

If possible, an employer should offer employees alternative employment, and explain why if it is not possible. If an alternative position is available, then the employee concerned has the right to work through a 4-week trial period before deciding whether they wish to take the job.

Once the process is complete the decision as to whether there is the need to make a redundancy should be confirmed at this time, the individuals concerned should be informed in a brief face to face meeting, or a video call given the current situation, followed by a written confirmation, and including details of their right of appeal.

Employees need to be given their full contractual notice or, if not, payment in lieu. This notice period will be set out in the individual contract of employment, and there are minimum periods prescribed in section 86 of the Employment Rights Act 1996.

Although statutory redundancy payments cannot be claimed under the CJRS, this notice pay can be, at least in part.

Working through each of the stages of the process in line with the relevant legislation is vital if an employer is to avoid claims for unfair dismissal and/or discrimination when choosing which employees to make redundant.

This last point is particularly relevant, if the employees being made redundant are currently shielding due to long term conditions (whether themselves or another), which may mean there is an overlap between the redundancy legislation and the law around equality and discrimination.

Given the current volatility, any employer would be wise to understand how they would implement a redundancy process, in their unique circumstances, hoping they never need to use it. Being prepared in advance will ensure the process is less disruptive and more efficient if it’s needed.

If you would like to discuss how your business might best face the threat of redundancies, please speak to Jason Alcock, an experienced employment law solicitor, in our dispute resolution team on 01543 267 196 or email him at jalcock@ansonssolicitors.com

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