TUPE or Redundancy?

Photo by Ian Tormo on Unsplash

Readers of this blog will know that TUPE and redundancy are two employment law issues which have featured regularly in the last month or so.

So, today, we have a story which combines both.

Jobs lost as courier SGM Distribution goes into liquidation

SGM Distribution, a courier company, based in North-East Scotland (Aberdeen and Letham to be precise) has gone into liquidation. Thankfully, 51 of the DGM employees have had their employment transferred to another employer. These fortunate individuals will, of course, have their core terms and conditions of employment protected by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended).

Sadly, 16 of DGM’s employees will be having their employment terminated by reason of redundancy. Redundancy is a potentially fair reason for dismissal in terms of Section 98(2)(c) of the Employment Rights Act 1996 – assuming that such an exercise has been carried out properly by the employer.

The definition of redundancy is contained in Section 139(1) of the Employment Rights Act 1996:

For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—

(a) the fact that his employer has ceased or intends to cease—

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business—

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

have ceased or diminished or are expected to cease or diminish.

Conclusion

Those former DGM employees unlucky enough to be made redundant are having their contracts terminated. On the other hand, the vast majority of the former DGM employees will maintain their continuity of employment (on their existing terms and conditions) with their new employer. They have a right not to experience any detriments to their terms and conditions of employment as a result of this transfer of an undertaking. Entirely positive changes to their contracts e.g increased pay, holiday entitlement, flexible working arrangements and enhanced family friendly working benefits would be most welcome. In terms of the TUPE Regulations, the new employer has limited scope for implementing negative changes to the employment contracts of the transferred employees. Any attempted changes must be for economic, technical or organisational reasons – not an especially profitable area for employers.

Postscript

Just when you find one story about the implications of TUPE or redundancy, another pops up. Please see a link to a relevant story from BBC Northern Ireland involving the Canadian company, Bombardier:

Bombardier to sell NI operations

The Canadian aircraft manufacturer employs about 3,600 people in Northern Ireland.

Copyright Seán J Crossan, 2 May 2019

More hell on the high street (or redundancy again)

Photo by Becca McHaffie on Unsplash

The difficult trading conditions on the UK high street don’t seem to be easing with news that Debenhams, one of the country’s biggest retailers, will close 50 of its stores. This will affect about 1,200 employees of Debenhams, many of whom will be facing up to the threat of redundancy.

Debenhams have just announced the names of the first 22 stores which will close in 2020.

Debenhams names 22 stores to close

The struggling department store chain plans to close the shops next year, affecting 1,200 staff.

Redundancy

Redundancy can be potentially fair reason for dismissal… if handled correctly by employers.

Only employees can be made redundant. 

Remember: S230(5) Employment Rights 1996 defines who is an “employee”.

The definition of redundancy can be found in Section 139(1) of the Employment Rights Act 1996:

(1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to-

(a) the fact that his employer has ceased or intends to cease-

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business-

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

The relevant legal provisions governing redundancy are quite extensive and can be found in:

● Trade Union and Labour Relations (Consolidation) Act 1992 

● Employment Rights Act 1996

● Information and Consultation of Employees Regulations 2004 

● Transfer of Undertakings (Protection of Employment) Regulations 2006

● Collective Redundancies and Transfer of  Undertakings (Protection of Employment) (Amendment) Regulations 2013

The really critical provisions of UK employment law which govern redundancy handling are to be found in the following:

● Sections 188-198 of the Trade Union and Labour Relations (Consolidation) Act 1992 

(Section 188 is further supplemented by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1999).

Handling redundancies

Employees should be selected for redundancy in a fair way.

The employees who are at risk for potential redundancy will be part of a group of individuals known as the redundancy pool.

Employers can manage situation in a number of ways. 

How?

● LIFO

● Volunteers 

● Disciplinary records

● Staff appraisal – skills, experience etc (redundancy matrices or re-applying for your job).

What is LIFO? 

Last in, first out – was the most commonly used method, but it could fall foul be regarded as indirect discrimination e.g. too many young people are made redundant. So there are limitations to this approach.

Redundancy selection criteria must be objective. 

Many employers will have contractual redundancy policies. Must stick with this: see John Anderson v Pringle of Scotland [1998] IRLR 64.

Appeals should be permitted.

Individuals will still be an employee until effective date of redundancy.

Avoiding redundancies

Redundancy could be avoided by:

● Short-time working

● Lay-offs

The employer needs to consult with employees or their representatives.

Both sides may not reach agreement, but consultation has occurred. 

 It has to be a meaningful exercise – not a paper one.  

Additional rights

Employees have additional rights in redundancy situations:

● Consultation with employer

● Notice period

● Suitable, alternative employment 

● Time off to find new employment

Selection for redundancy

Selection for redundancy is automatically unfair in relation to:

● Protected characteristics e.g. age, disability, gender, maternity and pregnancy etc

● Trade Union participation or acting as employee representatives

● Jury service

● Whistle-blowing & health and safety cases

● Asserting statutory rights

● Occupational pension trustees

Statutory redundancy pay

Statutory redundancy pay is most common payment. Only those employees who have 2 years or more continuous service are entitled to claim statutory redundancy pay.

It is worked out according to the following formula:

● half a week’s pay for each full year employees were under 22

● 1 week’s pay for each full year employees were 22 or older, but under 41

● 1 and half week’s pay for each full year employees were 41 or older

Length of service which can be used to calculate the amount of redundancy pay is capped at 20 years and the amount of weekly pay is capped at £525 (the maximum statutory amount claimable is £15,750) from 6 April 2019.

Employers can be more generous with redundancy pay or they can include employees with less than 2 years’ continuous service.

No tax is payable on redundancy pay less than £30,000.

Employees can calculate their entitlement to statutory redundancy pay by clicking on the link below:

https://www.gov.uk/calculate-employee-redundancy-pay

Notice of redundancy

Proper notice of redundancy must be given. Section 86 of the Employment Rights Act 1996 contains the relevant notice periods for termination of the employment contract.

The maximum period of notice for those employees with 12 years or more continuous service is 12 weeks.

Sometimes contractual periods of notice can be longer, but not shorter than the those laid down by the Employment Rights Act 1996.

That said, notice can be shorter if the employment contract permits employer to make a payment in lieu of notice. 

Employees will receive full entitlement to redundancy pay, notice pay, holiday pay & other entitlements.

Collective redundancies?

This situation arise where more than 20 employees are going to be  made redundant in a 90 day period. Fixed term contract employees do not need to be included in collective consultation, except if contract ending early because of redundancy.

The Debenhams’ situation is likely to be classified as a case of collective redundancy.

There must be consultation with with Trade Union or employee representatives.

Consultations must cover:

● ways to avoid redundancies

● the reasons for redundancies

● how to keep the number of dismissals to a minimum

● how to limit the effects for employees involved, e.g. by offering retraining

Length of consultation period?

No time limit for how long this period should be, but the minimum is:

● 20 to 99 redundancies – the consultation must start at least 30 days before any dismissals take effect

● 100 + redundancies – the consultation must start at least 45 days before any dismissals take effect

These minimum periods apply if employers are contemplating making collective redundancies within a 90 day period. 

The UK Coalition Government (2010-15) substantially reduced redundancy consultation periods.

Failure to consult employees?

Dismissals will almost certainly be unfair. 

In a collective redundancy situation, employers should notify the Redundancy Payments Service (RPS) by filling out form HR1. It is a (strict liability) criminal offence not to complete the HR1.

A link to a template HR1 form can be found below:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/782487/NEW_HR1.pdf

Failure to pay redundancy payments or payment of the wrong amount?

Affected employees have 6 months (minus 1 day) to lodge an Employment Tribunal claim.

Insolvent employers?

The State will ultimately pay out from the National Insurance Fund (employee’s should complete and submit an RP1 Form).

Employees can find out if their employer is insolvent by going to the following link:

https://www.gov.uk/get-information-about-a-company

A short film from ACAS about the core employments rights in relation to redundancy can be found below:

Copyright Seán J Crossan, 28 April 2019

Don’t fly with us …

Photo by Joel Barwick on Unsplash

Yet another story in the news today about the possibility of redundancies. UK airline Flybe has cancelled many flights because of the prospect of having to make staff redundant.

This has occurred because Flybe appears to be in serious financial difficulties.

As discussed in previous blogs, redundancy is a potentially fair reason for dismissal of employees if carried out correctly. The definition of redundancy appears in Section 139 of the Employment Rights Act 1996.

Flybe cancels flights amid redundancy talks

Flights from Belfast City Airport and from Birmingham are among the dozens of flights affected.

Copyright Seán J Crossan, 3 April 2019

Hell on the High Street

Photo by kevin laminto on Unsplash

It’s been a tough time for many retailers on the UK high street over the last few years.

This has led to a succession of well known businesses going into liquidation (e.g. Maplins and Toys ‘R’ Us UK ) or being taken over by other companies (e.g. Evans Cycles and House of Fraser).

In February 2019, it was announced that the music chain HMV was being taken over by Sunrise Records, a Canadian company. Sunrise was willing to take over 100 former HMV and Fopp Records stores from the company administrators. As a result of this acquisition, nearly 1500 jobs were saved. Unfortunately, 27 stores had to close with the loss of 445 jobs. Many music and film fans will lament the loss of Fopp’s Byres Road store in Glasgow which was one of the outlets that ceased trading.

The lucky HMV and Fopp employees will have their employment transferred to Sunrise Records in terms of the Transfer of Undertakings (Protection of Employment) Regulations 2006. This protects them from dismissal and guarantees continuation of their core terms and conditions of employment.

As for the unlucky employees, they are being made redundant in terms of Section 139 of the Employment Rights Act 1996. Redundancy is a potentially fair reason for dismissal – so long as the procedure is carried out fairly and objectively.

A link to a BBC article about the takeover of HMV and Fopp by Sunrise Records can be found below:

HMV chain saved but some stores will close

The firm is to buy 100 stores out of administration, but 27 outlets will close, including the Oxford Street store

Copyright Seán J Crossan, 3 April 2019

Mishandling redundancy?

Photo by Casey Botticello on Unsplash

An interesting story appeared in today’s Independent newspaper about allegations of racism directed against the office of Tom Watson MP, the Deputy Leader of the UK Labour Party.

The allegations (and they are allegations I would stress at this point) concern claims by a former employee of Mr Watson’s that she was unfairly selected for redundancy. Sarah Goulbourne, the former employee in question is alleging that she lost her post because of her race and/or ethnicity (she is of Afro-Caribbean descent). A person’s race is, of course, a protected characteristic in terms of the Equality Act 2010 and s/he has a right not to be subjected to unlawful discrimination or less favourable treatment.

A link to the story can be found below:


https://edition.independent.co.uk/editions/uk.co.independent.issue.270319/data/8841231/index.html

In terms of the Employment Rights Act 1996, redundancy can be a potentially fair reason for dismissing an employee – if handled correctly and fairly.

If, however, a person was selected for redundancy because they possessed a protected characteristic such as race, this would be extremely problematic for the employer. If racial discrimination could be proved by the ex-employee, the dismissal or termination of the contract on grounds of redundancy would almost certainly be automatically unfair.

Employers can access very useful advice about redundancy handling (and presumably how to get it right) from the ACAS website:

http://www.acas.org.uk/media/pdf/1/1/Redundancy-handling-accessible-version.pdf

It will be interesting to see if the case proceeds any further.

Copyright Seán J Crossan, 27 March 2019