Suitable alternative employment? It’s all about what’s reasonable for that employee
The Court of Appeal has handed down an important judgment on what is suitable alternative employment for an otherwise redundant employee.
The Court of Appeal has handed down an important judgment on what is suitable alternative employment for an otherwise redundant employee. If a redundant employee rejects suitable alternative employment they are not entitled to a redundancy payment. Employers often struggle to know when this can be argued robustly. In their judgment in the case of Devon PCT v Readman (positively overturning the Employment Appeal Tribunal’s finding for the employee) the Court of Appeal has emphasised that when deciding whether it is reasonable for an employee to turn down a role, you must look at the reasonableness of the refusal from the employee’s point of view, depending upon factors personal to them.
Mrs Readman was employed by Devon PCT as a community matron. When her role was made redundant, the role of hospital matron was identified by her employer as being a suitable alternative for her. The role had similar management responsibilities, the same seniority and pay, and was even in the same building as her office. The role was one which, on the face of it, was suitable for her. When she was made redundant after rejecting the role, the PCT refused to pay her a redundancy payment.
Mrs Readman argued that earlier in her career she had decided to move away from working in a hospital setting and this meant the rejection of the role offered was reasonable for her. Whether the employee has unreasonably refused the offer of suitable alternative employment is the second part of the legal test, the first being whether the role offered is objectively suitable. The Court of Appeal has sent the case back to the Tribunal to decide this question, emphasising that this is a test about reasonableness from the employee’s subjective point of view. Encouragingly for employers, they overturned the EAT’s decision that it was plain and obvious that Mrs Readman had acted reasonably in rejecting the role, holding that the facts of this case meant it was arguable either way (and that this was for a Tribunal to decide). Importantly they rejected the EAT’s attempt to add elements to the legal test. The Court of Appeal concluded that this is all about individual reasonableness and nothing more.
What does this mean for me?
When making redundancies, you will often assess whether another role might be suitable alternative employment for those at risk based on your own views. However, part of the legal test is whether the employee's own reasons for turning the role down are sound and justifiable for them. This can be difficult to assess when planning and costing a redundancy exercise, but when it comes to deciding whether to make a redundancy payment the individual's reasons must be very carefully considered. In overturning the appeal, this judgment makes it more likely that a Tribunal might accept your decision that an employee has acted unreasonably in rejecting a role. Problematically though, any such decision on your part must be all about what is or is not reasonable for that one individual. This is always a very difficult judgment call.
Making significant redundancy payments to those who turn down what you believe to be a perfectly good job can feel wrong, and may even undermine the cost savings envisaged from an exercise. This judgment tells us that there will be occasions when you are legally able to refuse to pay, but only after careful consideration of the individual's own personal reasons for turning the role down. There will be cases in which it is worth holding your ground and refusing to pay redundancy payments (particularly if your employee is entitled to a significant payment or enhanced contractual sum), but you should take advice on each unique set of personal reasons you face.