Information is for general guidance only and should not be relied on without taking legal advice for your situation.

Redundancy

What is redundancy?

Under section 139(1) Employment Rights Act 1996, ‘redundancy’ is defined as follows:

……. an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—

(a) the fact that his employer has ceased or intends to cease—

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business—

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

have ceased or diminished or are expected to cease or diminish.

This means that the dismissal must be caused by the employer’s need to reduce its workforce. Redundancy may happen because a workplace is closing down, or because fewer employees are (or are expected to be) needed for work of a particular kind. Normally the employee’s job must have disappeared; it is not redundancy if the employer immediately takes on a direct replacement (although a redundancy situation may also exist in a ‘bumping’ situation).

Redundancy procedure

Typically, employers should:

Step 1: Establish that there is a genuine redundancy situation, take adequate steps to consider alternatives to redundancy, warn and consult with affected staff.

Step 2: Consider the ‘pool’ from which redundancies will be made, and the selection criteria to be applied; list any alternative vacancies within the company or group.

Step 3: Meet with all of the employees who might be made redundant and explain the reasons for the potential redundancies. Consider asking for volunteers.

Step 4: Score each potentially redundant employee using the selection criteria and scoring guidelines.

Step 5: Write to those employees that have been provisionally selected for redundancy, inviting them to a meeting to discuss their provisional selection.

Step 6: Consult with each employee individually about their scores, the proposal to select them for redundancy and the terms of the redundancy. Discuss details of any available alternative roles within the group.

Step 7: After the meeting, follow up any suggestions made to avoid the redundancies and consider any representations made.

Step 8: Where a decision has been made to make an employee redundant, invite that employee to a further meeting and confirm that the employee has been selected for redundancy. Go through the redundancy package.

Step 9: Write to the employee confirming the decision and specify the termination date. Confirm that the employee has the right of appeal. Explain how to appeal and the relevant time limit.

Step 10: If employee appeals, invite them to attend a further meeting to hear the appeal which should if possible be held by someone senior to the person who held the previous meetings.

Step 11: Write to the employee confirming the outcome of the appeal and that this is a final decision.

Collective Consultation

If an employer is proposing to dismiss 20 or more employees at one establishment within 90 days, it must consult appropriate representatives of the employees concerned. If the employees are members of a recognized trade union, the appropriate representatives are representatives of the trade union. Otherwise, the employer should consult with elected or appointed employee representatives. A failure to consult with the appropriate representatives may render the employer liable to pay each redundant employee a protective award of up to 90 days’ pay.

Unfair dismissal

If an employee who is made redundant has more than one year’s continuous employment, they may bring a claim in the employment tribunal for unfair dismissal. To defend a claim for unfair dismissal, the employer would have to show that it had a fair reason for dismissal (which are prescribed in the legislation). The dismissal will also be unfair if the employer did not act reasonably in treating redundancy as a sufficient reason for the dismissal. In certain circumstances, the one year requirement is disapplied, for example if the dismissal was on the grounds of sex, race, pregnancy etc.

Payments and notice period

If an employee is dismissed by reason of redundancy, he or she will be entitled to receive their contractual notice period (or damages for failure to give notice). If the contract of employment contains a provision allowing the employer to make a payment in lieu of notice, it may elect to do so. Employees (with at least a month’s continuous employment) are entitled by law to a minimum statutory period of notice of one week for each year of continuous employment (subject to a maximum statutory notice period of 12 weeks).

In addition, employees who are made redundant may be entitled to statutory (and/or contractual) redundancy pay and to be paid for any outstanding holiday.

Statutory Redundancy Pay

When is statutory redundancy pay due?

Employees are entitled to statutory redundancy pay if:

- they are made redundant;

- they have at least two years’ continuous service; and

- they meet certain other conditions (see below).

They may also be entitled to other non-statutory payments if this has been agreed in their contract of employment.

Who can qualify for statutory redundancy pay?

Employees will receive payment only if they are working under a contract of employment. Self-employed people and members of a partnership do not qualify under the Employment Rights Act 1996 although they may have separate contractual agreements.

Directors and other office holders may be employees if they work under a contract of employment. They will not qualify if they do not work under a contract of employment.

Contracts of employment may be spoken or written and last for any length of time or be fixed. In law, employees generally have a contract as soon as they start work and by doing so prove that they accept the conditions offered by the employer.

A few groups of employees do not qualify for a statutory redundancy payment, for example members of the armed forces.

What ‘dismissal’ means

In general, to be due statutory redundancy pay, the employee must have been dismissed by the employer and the reason for dismissal must have been redundancy. ‘Dismissal’ includes constructive dismissal.

If an employee is laid off (that is, receives no wages) or put on short time (that is, receives less than half a week’s pay) for four weeks in a row or six weeks out of 13 weeks, they may also claim a redundancy payment without waiting to be dismissed for redundancy. They must make a claim in writing to the employer, who may refuse to pay if it believes normal working is likely to return within four weeks.

If an employee is on a fixed-term contract and it ends without being renewed, this counts as a dismissal and the employee may be due a redundancy payment.

If the employer says that redundancies will be needed and asks for volunteers, employees will qualify for a payment if they volunteer, as long as the employer actually dismisses them.

General rules on length of service

Employees must generally have at least two years’ continuous service to qualify for statutory redundancy pay.

Offer of a new job

An employee may well not be entitled to a payment if offered a new job with the same employer, an associated employer or an employer who takes over the business. But if the new job is with the same or an associated employer the employee will only lose the redundancy payment only if the new job is offered before the old employment contract expires, and starts within four weeks.

An employee who is offered a new job in this way can put off the decision whether or not to accept it for a four-week trial period. Or if they need retraining, the trial period may be extended beyond four weeks by written agreement between the employee and employer. If at the end of the trial period the employee is still in the job, they will be considered to have accepted it.

If the new job is not a suitable alternative to the old one (because of differences in capacity, location or terms and conditions of the contract of employment) and the employee turns it down before the end of the trial period, they will be considered to have been redundant from the date your original employment ended. But if they refuse an offer of a job that is a suitable alternative without a good reason, they will not be entitled to a redundancy payment.

What are the payments?

The amount of the statutory redundancy payment depends on:

- length of continuous service;

- how the years of continuous service relate to a particular age band; and

- weekly pay, up to a legal limit.

The amount of redundancy pay will be calculated as:

0.5 week’s pay for each full year of service where age during the year is less than 22

1.0 week’s pay for each full year of service where age during the year is 22 or above, but less than 41

1.5 weeks’ pay for each full year of service where age during the year is over 41.

With effect from 1 October 2009, the weekly limit for a week’s pay for the purposes of calculating statutory redundancy pay is £380.

The maximum number of years continuous service that can be counted for statutory redundancy payments purposes is 20. Length of continuous service is counted backwards from the ‘relevant date’. This is generally the date on which the notice given to the employee ends. But if the employer gives less than the legal minimum notice, the extra notice which should have been given is added on.

Certain absences – for example, caused by sickness, pregnancy or temporary shortage of work – can count towards continuous service even if the contract of employment was suspended.

What if the employer is insolvent?

If the employer is insolvent or cannot pay, the employee can apply to the Department for Business Enterprises and Regulatory Reform (BERR) for a direct payment from the National Insurance Fund. A copy of the form can be found on the BERR website at www.berr.gov.uk.

Time off work

Time off for job hunting or to arrange training when facing redundancy

An employee who is given notice of dismissal because of redundancy is entitled to reasonable time off with pay during working hours to look for another job or make arrangements for training for future employment. The time off must be allowed during the period of notice.

Employees are entitled to time off in this way only if they have had two years’ continuous employment with their employer on the date their notice expires or the date when the statutory minimum period of notice due under the legislation expires, whichever is the later.

Amount of time off

An employer should allow the employee reasonable time off. The legislation does not specify what is reasonable since this will vary with the differing circumstances of employers and employees. Some employees may need only to attend one interview or make one visit. Others may have to make a number of visits, some of which may involve travelling some distance.

Payment for time off

Employees should be paid the appropriate hourly rate for the period of absence from work but an employer does not have to pay more than two-fifths of a week’s pay, regardless of the length of time off allowed. This is arrived at by dividing the amount of a week’s pay by the number of normal working hours in the week. The method of calculation is similar to that used for computing redundancy payments. The week’s pay is calculated by reference to a date known as ‘the calculation date’. In computing pay for time off to look for work or arrange training, this date is the one on which notice was given by the employer.

An employer does not have to pay more than once for the same period. Any payment already made under an employee’s contract of employment for a period of time off to look for work will be offset against the employer’s liability under the provisions. If payment has been made by an employer for time off to look for work under the provisions, this will reduce any liability under the contract of employment.

Applying to an employment tribunal

If an employee wishes to file a claim in the employment tribunal for unfair dismissal, a protective award, statutory redundancy pay, notice monies, holiday pay or other sums owed, strict time limits apply. For an unfair dismissal claim, the limitation period is generally three months from the effective date of termination.

Compromise Agreements

What is a Compromise Agreement?

A Compromise Agreement is a settlement agreement in which an employee agrees to compromise their legal claims against their employer on agreed financial and other terms.

You may have been offered a Compromise Agreement during a ‘without prejudice’ discussion with your employer. This sometimes takes place when your employer is proposing to dismiss you whether for redundancy or some other reason, or if you have brought an employment tribunal claim or filed an internal grievance against your employer.

Why do you need legal advice before signing a Compromise Agreement?

You should take legal advice prior to signing a Compromise Agreement so that you know what your employment rights are before signing them away.

Also, in order for you validly to waive your employment tribunal claims against your employer, the agreement has to fulfil certain conditions which bestow protection on the employee. These include that you have taken advice from a ‘relevant independent adviser’ on the terms and effects of the agreement. ‘Relevant independent advisors’ includes solicitors and qualified trade union advisers.

What about my reference?

Both sides can agree in a Compromise Agreement that the employer will provide a reference in an agreed form to potential employers.

What are some other standard terms in a Compromise Agreement?

In addition to clauses about payment terms and references, compromise agreements usually contain terms preventing one or both parties from making disparaging statements about the other. Compromise agreements also often require the employee to keep the compromise agreement confidential. Often, employers will ask that the employee provides an indemnity against any tax payable on the compensation sum.

Who pays for the advice on the Compromise Agreement?

Usually, your employer will contribute a sum towards your legal costs. In many cases, this will cover your legal costs. In some cases, for example where lengthy negotiations are required, fees may exceed your employer’s contribution, in which case the balance will be payable by you. We are always happy to indicate to you at the outset what the costs position is likely to be.

What if I decide to bring a claim in the Employment Tribunal?

If you decide not to enter into a Compromise Agreement, we can act for you in pursuing a claim in the Employment Tribunal. We have substantial experience in acting for clients in their Employment Tribunal claims on a range of matters including unfair dismissal, complex discrimination claims, whistleblowing claims, redundancy pay, breach of contract and unlawful deduction of wages.

What service will Knight-Webb Solicitors provide?

Knight-Webb Solicitors are employment law specialists and have successfully advised on a large number of Compromise Agreements. We are based in Dulwich in south-east London but are able to provide appointments in central London at the convenience of clients.

If you are based outside London, we can arrange a telephone conference.

To discuss your situation with a solicitor, please call 020 72076195.

Employment Tribunals

If you wish to bring a claim in the employment tribunal, you should be aware that strict time limits apply.

Knight-Webb Solicitors are experienced in handling employment tribunal claims. We are members of the Employment Lawyers’ Association. For more information, please visit the ‘Employer’ and ‘Employee’ sections of this website.

To discuss your situation with a solicitor, please call 020 72076195.

Unfair Dismissal

An employer who dismisses an employee without good reason or without following a fair procedure lays itself open to a claim for unfair dismissal. When such a claim is brought, the employer has to establish the reason for the dismissal. The employment tribunal will then consider whether the dismissal was fair in all the circumstances. If the dismissal is held to be unfair, the employer can be ordered to re-engage, reinstate or to pay compensation to the ex-employee. The limit for the compensatory award (for dismissals on or after 1 February 2009) is £66,200.

Employment Contracts

Terms and conditions of employment may be express or implied. An example of an implied term would be the obligation to maintain trust and confidence – a breach of this fundamental term by the employee could result in dismissal for gross misconduct whilst a breach by the employer could result in the employee resigning and claiming constructive dismissal.

- Every employer is required to give each employee a written statement of particulars of certain terms of their contract not later than two months after the beginning of their employment. The written statement must:

- name the employer and employee;

- specify the date when the employment began and the date on which the employee’s period of continuous employment began;

- specify the scale or rate of remuneration or method of calculating remuneration;

- specify the intervals at which remuneration is paid eg weekly, monthly;

- specify the terms and conditions relating to hours of work, entitlement to holiday, incapacity due to sickness or injury, pensions, length of notice, job title; collective agreements;

provide certain information about applicable disciplinary and grievance procedures.

Any changes in the contractual terms or in other matters of which written particulars must be given must be the subject of a written statement given to the employee at the earliest opportunity and in any event no later than one month after the change.

If the employer fails to provide a written statement of particulars or to notify employees of changes, it could be liable for an award of between two to four weeks’ salary if the employee successfully brings a claim for unfair dismissal.

Restrictive Covenants

Employment contracts may contain express provisions seeking to restrain the employee from soliciting clients or employees, or working for competing businesses after the employment has terminated. Whether such a provision would be upheld by the courts would depend on whether the restraint is reasonable in the interests of the parties. The employer will need to demonstrate that the restraint is no wider than is necessary to protect its legitimate business interests. In judging the reasonableness of the restraint, the courts will consider its nature, ambit (geography and proscribed actions) and duration.

Restrictive covenants should be carefully drafted with the benefit of legal advice to increase the likelihood of enforceability.

Notice

The contract of employment will usually specify the period of notice to be given by either party to terminate the employment.

Whatever may be the contractual provisions, if the employer wishes to terminate the contract (unless dismissing for gross misconduct), the notice actually given must not be less than the statutory minimum period of notice. The contractual notice must be given if that is longer. The minimum statutory notice the employer must give (where the employee has at least one month’s continuous employment) is one week for each year of continuous employment (up to a maximum of 12 weeks’ notice).

Discrimination

Knight-Webb Solicitors have particular expertise in handling complex discrimination claims.

Age discrimination

The Employment Equality (Age) Regulations 2006 came into force on 1 October 2006. Amongst other things, the regulations prohibit direct discrimination, indirect discrimination, victimisation and harassment on the grounds of age in the sphere of employment and vocational training. However, the regulations provide that direct and indirect discrimination may be justified.

The regulations state that dismissal on the grounds of retirement can be a fair reason for the purposes of defending a claim for unfair dismissal provided the employer has observed the ‘duty to notify’ and ‘duty to consider’ procedures. In summary, these are as follows:

• the employer must notify the employee in writing of the date on which it intends to retire the employee, such notification to be given not more than twelve nor less than six months prior to the intended retirement date;

• the intended retirement date can only be on or after the employer’s normal retirement date or if it does not have one, on or after the employees’ 65th birthday;

• the notification must be in writing, dated and given to the employee not more than twelve months nor less than six months before the intended retirement date;

• a failure to give such notice could result in compensation of up to eight weeks’ (capped at the statutory amount for a week’s pay – currently £350 per week) pay and liability for automatic unfair dismissal;

• the employee has a statutory right to request that the employer does not make him retire;

• the employee’s request must be made at least three months, but not more than six months, before the intended retirement date. If the employer has not notified the employee, the employee should set out in his request, the date he considers to be the intended date of retirement;

• the employer must then consider the request within given time scales (depending on whether or not the employer complied with the notification procedure set out above);

• the ‘duty to consider’ the employee’s request will require a meeting with the employee, at which the employee may be accompanied by a fellow worker or trade union representative and the employer shall give the employee notice of its decision within 14 days following the meeting;

• if the employer fails to notify the employee of its intended date for the employee’s retirement, the employee can initiate a request to work beyond the retirement date provided he does so at least six months in advance of the intended retirement date.

Sex discrimination

Discrimination on the grounds of sex is made unlawful by the Sex Discrimination Act 1975. Discrimination on the grounds of marital or civil partnership status, gender reassignment, pregnancy or maternity leave is also unlawful under the Act.

Race discrimination

It is unlawful for a person to discriminate on racial grounds against another person. The law defines racial grounds as including race, colour, nationality or ethnic or national origins.

There are four main types of racial discrimination: direct, indirect, victimisation and harassment.

Discrimination on the grounds of religion or belief

Employees are protected against discrimination on the grounds of religion or belief.

Sexual orientation discrimination

Unlawful sexual orientation discrimination happens when someone is treated less favourably due to their sexual orientation, their perceived sexual orientation, or the sexual orientation of those they associate with.

Disability discrimination

The Disability Discrimination Act 1995 renders it unlawful to discriminate against disabled persons in employment and other areas. A person has a disability if they have a physical or mental impairment which has a substantial and long-term adverse effect on their ability to carry out day-to-day activities. Disability discrimination may take place in any of these ways: direct discrimination, disability-related discrimination, discrimination by failing to make reasonable adjustments, harassment and victimisation.

Whistleblowing

It is unlawful for an employer to subject a worker to a detriment or dismissal for making a protected disclosure. Such a dismissal will be automatically unfair and there is no qualifying period of employment.

A qualifying disclosure is information which in the reasonable belief of the worker shows at least one of the following:

- that a criminal offence has been committed, is being committed or is likely to be committed,

- that a person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject,

- that a miscarriage of justice has occurred, is occurring or is likely to occur,

- that the health or safety of any individual has been, is being or is likely to be endangered,

- that the environment has been, is being or is likely to be damaged, or

(f) that information tending to show any matter falling within any one of the preceding paragraphs has been, is being or is likely to be deliberately concealed.