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  • Writer's pictureRobert Spicer

Redundancy law and practice - Part 2

Closure of the workplace

  • An employee is dismissed for redundancy if it is attributable wholly or mainly to the fact that the employer has ceased or intends to cease to carry on business where the employee was employed.

  • Bass Leisure Ltd v Thomas: an employee’s place of work for the purposes of redundancy is a question of fact. The place where the worker actually worked is a key factor. Mobility clauses are irrelevant for this purpose. This decision was approved by the Court of Appeal in High Table v Horst. Where an employee has worked in only one location, that is the place of work regardless of any mobility clause. Where an employee has worked in several locations, the place of work is established by inquiry into the facts, taking account of contractual terms which might be relevant.

  • Where an employee is instructed to work at a different location or branch and the employee refuses, right to redundancy pay may be lost because she/he has refused offer of suitable alternative employment.

  • Where there is a mobility clause, this may be invoked by the employer to avoid making redundancy payments. In Home Office v Evans, the Court of Appeal ruled that an employer was entitled to invoke a mobility clause to avoid a redundancy situation on the closure of part of its business. The motives of the employer were not important. The issue was whether it was legally entitled to invoke the mobility clause.

Reduction of workforce

  • See section 139(1)(b), ERA 1996.

  • The employer requires fewer employees to do a particular kind of work. There need not necessarily be less work to be done. In McRea v Cullen & Davison Ltd, the employer wished to make better use of its resources. A manager who had been on sick leave for a long period was made redundant on his return to work because the employer had decided that the work could be done without him. The IT found that the dismissal was attributable to redundancy.

  • Where the employee is dismissed because of diminished requirements, this is dismissal for redundancy. In Safeway Stores v Burrell, B started work with S as a petrol station manager. S reorganised management and B’s post disappeared. He was told that his position had been made redundant. He complained of unfair dismissal. The ET found in his favour, applying the function test to decide that the requirements of the business to carry out work which B was doing had not ceased or diminished. S appealed to the EAT. The appeal was allowed. If the requirement for employees to do work of a particular kind remained the same, there could be no dismissal by reason of redundancy. The tribunal had erred in failing to ask itself whether there was a true redundancy situation, looking at the overall requirement for employees to carry out work of a particular kind and whether that situation caused B’s dismissal.

  • Murray and another v Foyle Meats. The claimants had contracts with FM to work in a slaughterhouse. The contracts contained a flexibility clause which stated that the claimants could be required to work in other parts of the plant. The market declined and FM made 35 per cent of slaughterhouse workers redundant. The claimants complained of unfair dismissal, arguing that they were not redundant because they could be required to work under the same conditions, although in different departments. The House of Lords found that the claimants had been made redundant. It applied a test of actual causation: was there a reduction in the workforce? Was the dismissal wholly or mainly attributable to that reduction?

  • Where the employer retains the same number of employees, but on different work: redundancy where particular job has disappeared altogether. Where job has been changed, for example because of changes in technology see Amos and others v Max-Arc Ltd. The test is whether the changed job requires different aptitudes, skill or knowledge.

  • Where the employer dismisses an employee because there is less work to do and the employee refuses to accept a cut in hours, this is redundancy. Packman t/a Packman Lucas Associates v Fauchon. F was a bookkeeper employed by P Ltd. P Ltd introduced a software package which reduced the number of hours to be worked by a bookkeeper. P Ltd asked F to reduce the number of hours which she worked. She refused and she was dismissed. The ET found that the reason for dismissal was redundancy. This decision was upheld by the EAT.

  • Bumping: when an employer offers a redundant employee another employee’s job and that employee is dismissed for redundancy. See Gimber and Sons v Spurrett.


Source: section 135, ERA: employee has basic right to redundancy payment

Those excluded from payments:

  • Independent contractors

  • Employment outside Great Britain

  • Less than two years continuous employment

  • Offer of suitable alternative employment

  • Misconduct

  • Offer of re-engagement or alternative employment.

  • Former registered dock workers and share fishermen

  • Crown servants, members of the armed forces or police services

  • Apprentices who are not employees at the end of their training

  • A domestic servant who is a member of the employer’s immediate family.

Payment Calculation:

Source: section 162, ERA

Information required:

  • Age of employee

  • Length of continuous employment

  • Amount of gross weekly pay

Working backwards, for each year in which employee was aged between 41 and 64: one and a half week’s pay.

For each year aged between 22 and 41: one week’s pay.

For each year from start of work to age 22: half a week’s pay.

Notes: 20 years maximum calculation

Maximum gross weekly pay: £538

Employment before 18 not counted.

Current maximum redundancy payment: £16,140

Weekly pay is the average earned per week over the 12 weeks before redundancy notice is required.

Short-term and temporary lay-offs

Workers can claim statutory redundancy pay that they are eligible for and have been temporarily laid off, without pay or less than half a week’s pay for either:

  • More than 4 weeks in a row

  • More than 6 non-consecutive weeks in a 13-week period.

Employers must be informed of the intention to claim statutory redundancy pay within 4 weeks of the last non-working day in the 4 or 6-week period.

The claim could be rejected if normal work is likely to start within 4 weeks and continue for at least 13 weeks.

Reduction of redundancy payments:

  • Misconduct

  • Employees nearing retiring age.

Where an employer fails to pay, the redundant worker may apply for payment direct from National Insurance Fund.

Disputes are referred to Employment Tribunal: section 170, ERA.

Redundancy payments not subject to recoupment.

Time limit for claims: six months from “relevant date”

Relevant date:

  • Contract terminated by notice: date when notice expires

  • Contract terminated without notice: date of termination

  • Fixed term contract: date on which fixed term expires

  • Employee taken to have been dismissed: date on which notice expires

  • Special rules where employee worked for trial period.

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