Motives behind redundancy situations
In the case of Berkeley Catering Limited v Jackson UKEAT/0074/20/LA, the Employment Appeal Tribunal ('EAT') considered whether the manner in which a redundancy situation arises or the motive behind it affects whether a genuine redundancy situation exists.
Genuine Redundancy Situations
Redundancy occurs when an employer decides to reduce the number of its employees within its business. This could be due to a number of reasons, including economic pressures, changes in the nature of the business or restructuring.
Provided that the Employment Tribunal ('ET') is satisfied that redundancy is the genuine reason for a dismissal, it will not interfere with how that redundancy situation arose.
It has also been found that redundancies can occur in a successful business: there do not need to be economic difficulties. A business can, at any time, decide to restructure the organisation and, as such, reduce the need for certain roles. If the reorganisation leads to a diminution for employees to carry out certain work, this can constitute a redundancy.
Decisions are fact sensitive and the ET will consider all the relevant circumstances to establish whether there has in fact been a redundancy.
The Claimant was employed by the Respondent as a Managing Director, having taken over the role from the owner of the business. From around 2017 onwards, the owner started to spend more time within the business and began excluding the Claimant from activities and undermining her work. In March 2018, the owner announced that he was taking control of management decision-making under the title of CEO, and that the Managing Director role would be redundant.
The Claimant was sent an "at risk of redundancy" letter and told that there were no suitable alternative roles for her. The Claimant was then given notice and was told that she had been made redundant. She requested an appeal, however, this never occurred.
The Claimant issued a claim for unfair dismissal on the basis that she had been effectively pushed out of the business and that there was no real redundancy situation. The Claimant also argued that there had been no fair redundancy procedure and that the Respondent had acted in bad faith in dismissing her.
The ET held that there was no redundancy as a matter of law and fact, and that there was no business reorganisation constituting some other substantial reason for dismissal. The Respondent appealed to the EAT.
What was held
The EAT considered whether the reason for dismissal was a redundancy or "some other substantial reason" consisting of a business reorganisation.
The EAT held that the ET had erred in its review of whether the redundancy situation was genuine. The EAT stated that either a redundancy "exists or it does not" and that it is open for the employer to organise its affairs in a way that ultimately diminishes the need for a particular work. The motive of the employer is irrelevant to the question of whether the redundancy situation exists. This can still be relevant in determining whether or not the dismissal was fair, but it does not impact on the existence of a redundancy situation.
Notes for Employers
Employers should take care when dismissing employees on the grounds of redundancy to ensure that there is a genuine redundancy situation. Equally, they should be aware that not all redundancy situations need to arise from economic down-turns or business closures: a simple restructuring of a business could lead to genuine redundancies.
This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Valerie Bond to discuss any issues you are facing.