The Employment Appeal Tribunal (EAT) has held that there was a redundancy situation where the owner of an organisation absorbed the role of its Managing Director.
A redundancy situation can exist where a business, or part of it, is shut down completely. This can also occur if there is a shut down at a specific location (even if moving to a new location).
You can also consider redundancy if the requirement for employees to do work of a particular kind has reduced or come to an end. Keep this in mind when dismissing employees on the basis of redundancy. Tribunals will assess the facts to determine if a redundancy was genuine, or used as an excuse to get rid of an employee.
One of the major cases that informs decisions in this area is Safeway Stores Plc v Burrell. In this case, it was held that, when determining if a redundancy is genuine, tribunals shouldn’t consider if there has been a diminution of the work in question. Instead, they should focus on whether there has been a diminution in the number of employees required to do the work.
Berkeley Catering v Jackson
This case concerned an employee who had worked for an organisation for some time. She was eventually promoted to the role of Managing Director. The owner of the organisation had originally filled this role, but stated he was taking a step back.
As time went on, the relationship between the claimant and the owner began to break down. The claimant argued that owner was deliberately undermining her and excluding her from important decisions. Eventually, the owner announced that he was to make the Managing Director role redundant as he intended to take on much of the duties himself.
The claimant was provided redundancy pay and the relevant notice, but crucially not afforded the chance to appeal. She later brought a claim to the employment tribunal (ET) for unfair dismissal. Her main arguments were that she had been displaced from her role by the owner. This meant there had been no genuine redundancy situation. Even with this in mind the redundancy procedure had not been fair. This was because an alternative role had later come available that had been given to someone else which she felt she could have filled.
The ET ruled that there was no genuine redundancy situation. This meant that it wasn’t necessary for them to determine if the procedure had been fair. In forming their decision, they outlined that the requirement to do work of a particular kind had not diminished. This was because the owner had undermined her and intended to take on her role for himself. There was not a situation where there had been a diminishing need for a Managing Director as the role was going to be taken on by other staff.
The respondent appealed against this decision to the EAT. They stated that the tribunal had erred by focusing on the diminution of work. Instead, they should’ve focused on the number of employees required to do it, as outlined in the Burrell case.
The EAT upheld their appeal. They outlined that the undermining of the claimant wasn’t relevant to considering whether there had been a genuine redundancy. It would be relevant to a future question of unfair dismissal, however. To determine a genuine redundancy, the question to focus on is:
“What was the reason for the dismissal?”
Applying Burrell, they found that there had been a diminution in the number of employees needed to undertake a particular role. The owner had intended to take on more of the Managing Director’s duties. This meant the need for a separate individual having this job had diminished. The claimant’s duties had been absorbed by existing staff members, meaning her dismissal did amount to a redundancy situation.
However, the EAT went on to explain that the issue of fairness now became a factor. As there was a redundancy established, it needed to be determined if the procedure was fair. This called into question the undermining that the claimant had experienced. They also considered the lack of an appeal process and the potential alternative roles she could have been offered. The EAT therefore remitted the case to a fresh tribunal to consider this point.
Note for employers
This case shows that roles being absorbed by other employees can still amount to a genuine redundancy situation. This is provided the organisation can clearly show the number of employees needed to do a job has diminished.
This can certainly serve as a defence when a redundancy is questioned. However, organisations should still proceed carefully. As seen here, the facts will be carefully assessed by the tribunal. It will not avoid additional claims that the procedure followed was unfair.
If you're concerned with how this ruling may affect your business, speak to a Croner expert today on 01455 858 132.
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