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Employment update: Redundancy dismissals

Redundancy dismissals ought to be more straightforward than other dismissals. Put simply, employers need fewer people, so dismissals will inevitably…

Redundancy dismissals ought to be more straightforward than other dismissals. Put simply, employers need fewer people, so dismissals will inevitably result.

In practice the legislation and case law relating to redundancies is difficult and ever changing. There have been a number of important developments over the past 12 or so months that HEIs need to take in to account as they ensure that their workforces evolve along with the institution and the wider changes affecting Higher Education. 

This article focuses on changes to the law relating particularly to collective redundancy issues.

1.  The wonder of Woolworths

The recent collective redundancy case at the Employment Appeal Tribunal (“EAT”) (commonly referred to as the “Woolworths” case) took many by surprise. In summary, it decides that the threshold of 20 or more employees for collective redundancy purposes, should be looked at across all of an employer’s establishments and not for each separate establishment. This is so even though the UK legislation expressly refers to numbers at separate establishments. The EAT decided that this wording was incompatible with the European legislation from which it derived and as such the reference to establishment should effectively be ignored. 

This EAT decision will NOT decide the issue once and for all. The Government was invited to join the EAT proceedings but declined. The financial and other implications of the EAT decision, for employers and the government directly, mean that it has now successfully applied to participate in an appeal to the Court of Appeal.

Independently of this, the Industrial Tribunal in Northern Ireland has referred a similar issue direct to the European Court (Lyttle and others v. Bluebird, a case which concerned redundancies from the Bon Marche chain of clothes stores). 

The matter is not at all clear for employers but should be clearer by the end of 2014.

As matters stand, HEIs should assume that the Woolworths decision is correct and should amend their practices accordingly.

Most HEI’s tend to look across their university as a whole rather than breaking down in to separate establishments (e.g. faculties) for redundancy purposes. However there may be some exceptions to this; university employees based at a sports facility on an entirely separate campus for example; residential facilities; cultural facilities. Until we have further clarification then HEIs should consider numbers of redundancies in these separate establishments together with numbers elsewhere within the University as a whole. 

2.  Fixed terms don’t count

The Woolworths case can lead to real difficulties for employers of large, complex organisations as they try to grapple with redundancy numbers across the employer as a whole, not just within each separate establishment which makes up that employer.

However, for HEIs in particular, some collective consultation changes brought in on 6 April 2013 will help their collective redundancy management.

Now, where an employer is proposing to dismiss 20 or more employees at one establishment within a 90-day period, the proposed dismissal of employees on fixed-term contracts "at the agreed termination point" are excluded from collective redundancy consultation obligations.

This settled a conflict in the way that 2 Universities were treated by the employment tribunal system; the University of Lancaster was unfortunate to be on the receiving end of an employment tribunal award when it had not complied with collective redundancy legislation when ending fixed term contracts. More recently in Scotland, the University of Sterling successfully resisted an award where it argued that termination of a fixed term contract was not a redundancy dismissal. Clarification was needed and the changes in April provided this.

This change is helpful to research heavy institutions particularly, who do not have to continue to monitor the position of research projects, funding and the employment of fixed term employees engaged on such projects.

It is important to bear in mind though that the legislation change only applies to the dismissal of fixed term employees at the end of the fixed period. Where it is proposed to make fixed term employees redundant part way through their fixed term then those proposed redundancies will count towards numbers for collective consultation purposes.

The collective consultation changes of April 2013 also reduced the minimum consultation period for large (100 or more) redundancy exercises from 90 days to 45 days.

3.  Transfer of consultation

It is not uncommon for a relevant transfer under the TUPE regulations to result in redundancies. Sometimes a relevant transfer involves carrying out services from a different place of work, sometimes it involves the merging of 2 workforces and the need or opportunity to make savings and other times a workforce will be restructured to fit within the structure of the new employer (the transferee).  There has been some confusion about the extent to which a new employer (transferee) can consult with those employees whose employment rights are expected to transfer to the new employer or whether they will need to wait for the transfer itself to occur. This can be particularly troublesome and expensive for a new employer when it wants to bring in a relevant change from the time that the transfer happens. A change in location is a good example of this.

A number of TUPE related changes were brought in at the end of January 2014. Those changes include provisions allowing a transferee (with the transferor’s permission) to begin a collective consultation process, consulting with representatives of those employees who are likely to transfer from transferor to transferee under the intended transfer. Importantly, there will not be a requirement for this pre transfer redundancy consultation but the legislative changes will provide for it to be there as an option. 

4.  Goliath v. David.

(….or rather USA v. Nolan.) The issue here was whether and to what extent an employer needs to apply the redundancy consultation legislation to operational decisions which are the cause of redundancies or whether the obligation to consult in this way, only applies once the operational decision has been made. A decision to close a faculty or campus for example: does an HEI consult (within the terms of collective redundancy consultation) about the proposal to close it or does it consult once that decision has been made and redundancies are, as a result, almost inevitable?

In this case the operation decision was about the closure of a US airbase located in the UK. The US Government did not engage in a process of collective consultation with representatives of employees employed at the airbase about the strategic decision to close the base. Instead, it made a decision to close and then undertook a process of closure which included collective consultation with employee representatives. Mrs Nolan was one such representative and challenged the US’s actions on the basis that they should have consulted from an earlier stage and involved the representatives in consultation about the proposal to close the base.

The Employment and Employment Appeal Tribunal agreed with Mrs Nolan. The Court of Appeal referred the case to the European Court of Justice (ECJ) who declined to make a decision on the point, as that the European legislation (from which the UK collective consultation legislation derives) did not apply to employees of public administrative bodies. The ECJ decided that the US Government was such a body although also acknowledged that the UK legislation did not contain such an exclusion and so it was for the UK courts alone to decide this particular case.

It had been hoped that a decision of the ECJ would provide some greater certainty about when collective redundancy consultation should begin. Unfortunately it did not and with UK case law as it is at present, HEIs are advised to consult about the strategic decision where that decision makes redundancy dismissals very likely or inevitable.