View the related Tax Guidance about Collective redundancy
Collective redundancy ― overview
Collective redundancy ― overviewIntroductionWhere an employer is proposing to dismiss as redundant 20 or more employees within a 90-day period, this may be classified as a collective redundancy.In a collective redundancy situation, there are additional obligations on the employer in addition to the steps it should take in order to avoid having a dismissal by reason of redundancy treated as unfair (see the Individual redundancy guidance note for details of those steps). The additional obligations for employers making 20 or more employees redundant are set out in the Trade Union and Labour Relations (Consolidation) Act 1992, ss 188–198, and described below.For the purpose of collective redundancy, every dismissal is treated as a redundancy except those that the employer can show are for one or more reasons related specifically to the individual concerned. The guidance that has been provided by the courts for best practice in relation to the statutory requirements around collective redundancies is not set in stone but, in practice, it is often taken as a starting point by Employment Tribunals considering a dispute. As with individual redundancies, the requirements for a fair procedure will vary with current employment practice, the size of the employer, the number of redundancies to be made and all the other circumstances of the case. Where an employer is proposing to dismiss 20 or more employees as redundant within a 90-day period, statutory requirements for consultation apply. For information on the statutory consultation requirements and process, see the Information and consultation in collective
Information and consultation in collective redundancy
Information and consultation in collective redundancyWhen do the statutory obligations apply?Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within any period of 90 days, specific statutory requirements for information and consultation exist (see the Collective redundancy ― overview guidance note). The duty requires the employer to consult with appropriate representatives of the affected employees about ways of avoiding the dismissals, reducing the number of dismissals and mitigating the consequences of the dismissals. If an employer fails to comply with these requirements, a claim for a protective award of up to 90 days’ pay per employee may be made to an employment tribunal. This note deals specifically with the information and consultation requirements in a collective redundancy scenario. This UK obligation actually derives from a European Directive, the European Collective Redundancy Directive (98/59/EC). Although the law applies to 20 or more employees at one establishment, the European Directive which it implements refers to establishments in the plural. In the combined case of Union of Shop, Distributive and Allied Workers (USDAW) and B Wilson v WW Realisation 1 Ltd (in liquidation), Ethel Austin Ltd and Secretary of State for Business, Innovation and Skills (C-80/14), the European Court of Justice clarified that the term ‘establishment’ in the European Redundancy Directive (98/59/EC) is to be interpreted as referring to the unit to which the worker was assigned their duties. Therefore, each establishment is to be considered separately. Where fewer than 20 employees are being made
Individual redundancy
Individual redundancyAn individual redundancy is a dismissal that can be attributed wholly or mainly to a situation in which:•the employer has ceased to carry on the business for the purpose of which the employee was employed (ie a business closure)•the employer has ceased to carry on the business in the place where the employee was employed (ie a workplace closure)•the requirement of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where the employee was employed have ceased or diminished (ie reduced requirement for work)‘Ceased’ as well as ‘ceased or diminished’ also includes scenarios in which the employer intends or expects for the business or work carried out to cease or diminish. This permits employers to plan for changes to their business operations and work force in an organised fashion.If there is an issue about the place where the employee works, this means the place where he works as a matter of fact, not the places where he could have been asked to work under his contract of employment. If the employer proposes to make 20 or more employees redundant within a 90 day period, the rules on collective redundancy are also likely to apply, regardless of whether or not such employees are spread across different offices or sites. For further information on collective redundancy, see the Collective redundancy ― overview and Information and consultation in collective redundancy guidance
Redundancy ― an introduction
Redundancy ― an introductionRedundancy is a dismissal that occurs because the employer’s business, or its requirements for a particular type of work, ceases either generally or in the specific location where the employee works. The reason for the dismissal is effectively unrelated to the individual’s performance but is the result of commercial decision-making by the employer or some specific economic circumstances that an employer faces.Redundancies entitle employees to various statutory rights and, in the case of collective redundancies, involve rigorous requirements for consultation with the work force. This means that redundancies have the potential to expose the employer to liability stemming from successful employee challenges and claims. Careful planning for and structuring of a redundancy process is therefore required. This note provides a brief introduction to redundancy. The supporting guidance notes in this sub-topic provide further guidance on the specific important aspects of the redundancy process.The law to be considered depends on whether the redundancy arises as part of a collective redundancy situation or is simply an individual redundancy.Individual redundancy ― definitionRedundancy is dismissal that is wholly or mainly attributable to either:•the fact that the employer has ceased or is going to cease carrying on the business for the purposes of which the employee is employed, either altogether or in the place where the employee was so employed•the fact that the requirements of the business for employees to carry out work of a particular kind or to carry on such work at the place where the employee
Variation of terms and transfers
Variation of terms and transfersChanging employment arrangementsChanging an employee’s employment arrangements as part of a TUPE transfer does not always involve a change in the employee’s terms and conditions. The contract may already include inherent flexibility, such as a right for the employer to change duties. Such flexibility can be used in the same way following a TUPE transfer as in other situations with no contractual variation. However, it should be borne in mind that TUPE allows an employee to resign and claim constructive dismissal where there is a ‘substantial change in working conditions’ to the employee’s material detriment. ‘Working conditions’ here includes non-contractual conditions.Further, there will be information and consultation obligations under TUPE to the extent that the proposed changes to employment arrangements constitute ‘measures’. The definition of 'measures' in relation to TUPE is relatively broad and includes any changes that were not an inevitable consequence of the transfer. Following a decision by the EAT, the key question an employer should ask itself when attempting to determine whether a change constitutes a measure is, 'does the change have the potential for causing concern amongst the employees?' In Institution of Professional Civil Servants V Secretary of State for Defence [1987] IRLR 373, the High Court described ‘measures’ as ‘a word of the widest import’. It can catch any action, step, or arrangement envisaged by the employer. In a non-TUPE situation where a change in employment arrangements involves a contractual change, common law requires:•consent from that employee•consent from
Suitable alternative employment
Suitable alternative employmentIntroductionThe question of suitable alternative employment arises when an employee who has been made redundant is offered, before his original contract comes to an end, a renewed or new contract for employment by the same employer or an associated employer but on different terms and conditions, starting within four weeks of his dismissal. If the employee accepts the offer of employment on different terms and conditions, the question of its suitability never arises. He is simply considered not to have been dismissed by reason of redundancy and so is not entitled to a statutory redundancy payment. If the employee has been in the group of affected employees in a collective redundancy situation, the employer’s obligations towards him regarding information, consultation and time off to look for other work are unchanged up to the time he accepts the alternative employment offer.Employees cannot maintain their rights to redundancy payments simply by refusing any alternative work that is offered to them. An employee cannot unreasonably turn down alternative work if it:•is suitable•was offered before the end of the previous employment•starts four weeks or less after the end of the previous employmentERA 1996, s 141If an employee does refuse the offer of suitable alternative work, he loses his entitlement to the redundancy payment. The same applies if the new employment is on the same terms and conditions, although the question of suitability will not arise, only the question of whether a refusal was
Reasons for dismissal ― generally
Reasons for dismissal ― generallyOnce it is established that a claimant has the right to bring an unfair dismissal claim ― in other words that he was an employee, he was dismissed, his claim was presented in time and he has the requisite continuous employment ― it will generally be for the employer to show:•what the reason or, if there was more than one, the principal reason was for dismissing the employee•that it was a potentially fair reason for dismissalAn employment tribunal will investigate the real reason for dismissal. The fact that the employer told the employee that the reason for their dismissal was, for example, redundancy, will not preclude a tribunal from finding that, on the evidence before it, the real reason for dismissal was something different.An employment tribunal will investigate the real reason for dismissal. The fact that the employer told the employee that the reason for their dismissal was, for example, redundancy, will not preclude a tribunal from finding that, on the evidence before it, the real reason for dismissal was something different.If there is a dispute over the reason for dismissal, the employer bears the burden of proving which of the competing reasons was the principal reason for dismissal. In establishing what the reason for dismissal was, the employer can only rely upon facts that were known to them at the time of the dismissal and not matters that may have come to light later (although these may be relevant to the issue
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