In March 2020, as part of the pandemic prescription pertaining to the workplace, the Government suspended the right to pursue statutory severance payments after a 4 week lay-off. This restriction has now been extended to run to August 10th next. The objective of the initiative is to prevent a swarm of severance claims in response to the Covid crisis.

However, predictions from an array of authoritative sources, including the European Commission and the ESRI - and the hard evidence from recent redundancy initiatives at Aer Lingus, Bewleys, Brinks, CityJet, Debenhams, the Dublin Airport Authority, Easons and National Pen – indicate that an economic downturn of some magnitude is on the cards. Likewise, IBEC’s recent survey of 550 Chief Executives found that almost half now expect a decrease in staff numbers. Clearly, ‘redundancy’ will return as a ‘hot topic’ on the Human Resources’ agenda. Hence, to enable parties take the right route to redundancy, this ‘How To’ article offers some practical guidance in the form of 9 key rules, designed to ensure that parties don’t repeat the costly mistakes of the 2008-14 recession.

At the outset, it is important to note that should an employer fail to confirm the validity of a ‘redundancy’, then their action can be classified as an unfair dismissal. That is, the employer cannot change from a ‘redundancy defence’ to a ‘fair dismissal defence’ (and claim that the employee contributed to the dismissal). The bottom line here is that should employers ‘nail their colours to the mast’ by claiming ‘redundancy’ and this position is rejected by a third party, they are stuck with this defence.

Third Party Findings

Of course, even if the redundancy argument prevails, there is an array of ‘hoops’ to be jumped through to ensure that the employer’s actions don’t fall foul of the law. In 2011 the Employment Appeals Tribunal (EAT) summarised same, adjudging that:

‘When an employer is making an employee redundant, while retaining other employees, the selection criteria being used should be applied in a fair manner. While there are no hard and fast rules as to what constitutes the criteria to be adopted nevertheless the criteria to be adopted will come under close scrutiny if an employee claims that they were unfairly selected for redundancy. The employer must follow the agreed procedures when making the redundancy. Where there are no agreement procedures in relation to selection for redundancy, as in this case then the employer must act fairly and reasonably’ (UD206/2011).

In fact, only last month the Workplace Relations Commission (WRC) chided one employer for a ‘very badly handled’ job termination (ADJ-00024771 & 22379), whilst at the same time another determination found that a retail store ‘did not act fairly and reasonably’ in its dismissal of a senior sales assistant via redundancy (ADJ-00024148). It is also relevant that earlier this year the same source reminded parties that:

‘There is a considerable amount of case law in relation to the reasonableness of the employer in relation to the fair and objective selection of employees for redundancy.   In Boucher v Irish Productivity Centre [1994 EL 205] the Tribunal enunciated the burden on an employer to: ‘establish that he acted fairly in the selection of each individual employee for redundancy and that, where assessments are clearly involved and used as a means of selection, that reasonable criteria are applied to all the employees concerned and that any selection for redundancy of the individual employee in the context of such criteria is fairly made.’ (See ADJ-00023957).

This ‘reasonableness’ test arises under Section 6 (7) of the Unfair Dismissals Act, 1977 (via an amendment at Section 5 of the Unfair Dismissals (Amendment) Act, 1993). The test places the burden of proof on the employer to show:

I.         that the dismissal was wholly connected to redundancy and

II.        to justify the selection process, whereby particular employees were selected for redundancy.

Such justification is derived from the Act’s direction to third parties to assess ‘the reasonableness or otherwise of the conduct’ of the employer.However, in the wake of the 2008 recession, employers were frequently held to be legally liable where the process was mismanaged. As a result, the employer’s bill far exceeded the redundancy pay-out.  Hence, one would do well to log the fact that redundant employees can claim unfair dismissal on the basis that:

(a) other employees should have been considered in the process;
(b) the process differed from a previously agreed procedure;
(c) the criteria used were unfair and/or
(d) selection was on the basis of discriminatory grounds (e.g. age, race).

That is, it is of paramount importance to ensure that having decided to make a role redundant and identified that more than one employee does this or a similar role/work, one meets the relevant obligations. This will ensure that the redundancy process doesn’t become yet another nightmare for employers, allowing them to focus on other pressing priorities. So, to get the redundancy programme right, one should ensure to adhere to the following rules:

Rule No. 1 - Communicate and Seek Proposals

Case precedent confirms the importance of communication and considering options prior to effecting redundancies (see UD 950/2008 to UD 957/2008). One should inform the affected employee(s) of the situation, the plan or strategy and invite proposals for consideration (e.g. voluntary redundancy, pay cuts, reduced work hours/ arrangements, redeployment). This will help ensure avoidance of liability on the grounds identified by the EAT in 2012, when it concluded that: ‘No forewarning was given and no alternative was considered’ (UD827/2012).

Likewise, in 2007 the Tribunal held that ‘the respondent did not give any genuine consideration to the proposals put forward by one of the claimants’ (UD787/2007). Similar transgressions featured the following year, as the Tribunal held against the respondent employer because:

‘No other position was looked at and nor did the respondent examine any other methods to make the required savings. Short-time and lay-off were not realistically considered. The claimant was given no notice of the respondent’s severe financial difficulties or of his impending redundancy. Consideration was not given to offering the claimant alternative employment within the company, although it was accepted by the respondent that he could easily have worked as a security guard. The Tribunal is satisfied that the claimant was unfairly dismissed by reason of the procedures used to dismiss him and due to the manner of his selection’ (UD619/2008).

Rule No. 2 - Take the Right Route

The standard routes for implementing a redundancy programme are:

(a)   follow past practice;

(b)  interview for the remaining jobs and

(c)   construct a matrix of relevant criteria, to assess each eligible employee against.

The bottom line here is that whichever route is taken, it must be objective. That is, it should not purposely or unnecessarily place one or more employees at an unfair disadvantage.

One should also consider the practice of ‘bumping’ when compiling the list of eligible employees for redundancy. ‘Bumping’ is a process whereby an employee whose role is redundant is redeployed into an alternative role, and the individual who previously undertook that role is made redundant. Case precedent indicates that ‘bumping’ is legally permissible, subject to the correct procedure being followed in respect of the bumped employee (see UD2409/2009).

Rule No. 3 - Agree and Adhere to Past Practice

If there is past practice and/or an agreed procedure between the employer and the union (e.g. last-in-first-out (LIFO)) and there is no enduring reason (e.g. skill shortages) to justify a departure from it, stick to it. The ‘last-in-first-out’ (LIFO) procedure - based on commencement dates/length of service - is both objective and easy to apply. As held in 2007, ‘the Tribunal is satisfied that LIFO was fairly applied as the selection criteria to choose the candidate for redundancy’ (UD534/2007).  However, employers should be mindful that selecting on the basis of LIFO only could result in selection of those employees with relevant skills that the employer has recently recruited to help drive forward the business. In addition employers should also be mindful that in solely using LIFO an employer may inadvertently select more younger workers and this could give rise to potential age discrimination claims.

Rule No. 4 - Interview Properly

As noted above, one route to redundancy is to invite all in the eligible pool to interview for the remaining jobs. This route may also entail appropriate tests (e.g. aptitude, psychometrics). As with standard selection interviews, it should properly evaluate the interviewees’ suitability for the remaining roles (see www.legal-island.ie/articles/ire/features/how-to/2017/feb/how-to-conduct-a-selection-interview/).

In this regard, it is worth recalling the Tribunal’s decision in Johnston -v- Floorwise (UD1826/2010), where the employee was selected for redundancy on the basis of a behavioural and competency-based interview process. In this case the Tribunal determined that ‘objective selection criteria are needed to carry out a proper redundancy procedure. There is no evidence that such a procedure was carried out in this case. The purpose of those interviews with the sales team, including the claimant was unclear and lacked focus’. Hence, it was held that the claimant was unfairly dismissed on the basis of unfair selection for redundancy and was awarded €31,000 in damages.

Rule No. 5 - Construct a ‘Fit for Purpose’ Matrix

Should the ‘past practice’ and ‘interview’ routes to redundancy be rejected, the use of a ‘selection matrix’ remains an option. This is a method whereby one lists the skills/criteria needed to allow the business to continue as a going concern and each employee is then assessed vis-a-vis these skills/criteria. Such matrices normally comprise a range of relevant criteria, enabling differentiation between employees. Criteria commonly chosen include qualifications, training, skills/competencies, relevant experience, client relationships, capacity to generate income and performance history/track record. To reflect their relative importance, one may give different weights to each criterion. Having scored the employees in the redundancy pool against the criteria, those with the lowest scores are selected for redundancy.

The bottom line here is that the matrix must enable assessments against objective and consistent criteria vis-a-vis the employer’s future needs. So, caution should be exercised to avoid a Labour Court finding that the matrix was: ‘complex, opaque, subjective and open to manipulation in order to achieve a particular result’ (EDA095). That is, the criteria chosen – and one may apply different criteria to different work areas - and the scores awarded, should be capable of substantiation on the basis of objective data.

On the need to substantiate scores, as an example, if ‘performance’ is used as a criterion, scores from performance reviews/appraisals may be used where they have been conducted consistently across all employees in the affected pool, are based upon objective measures and are not under appeal. It is also appropriate to apply a reasonable time frame over which this performance is assessed, with a longer time frame likely to yield a more representative or accurate assessment. To summarise, if deploying a ‘redundancy matrix’, one should be able to:

• Justify the selection, weighting and application of the criteria and the scoring system used.
• Substantiate the scores awarded.
• Minimise subjectivity in the assessment process, via usage of more than one assessor.
• Apply moderation methods to eliminate inappropriate anomalies (e.g. persistent assessor leniency or severity).

Rule No. 6 - Put Employees in the ‘Matrix Picture’

Before finalising a ‘selection matrix’, employers should consult with the employees or their representatives. That is, the affected employees should be made aware of the criteria to be applied prior to the redundancy process commencing. Furthermore, they should be extended an opportunity to comment on them, on how they will and have been applied, to review the scores and to influence their revision where there is objective data for doing so. For example, unbeknownst to the employer, an employee may have relevant experience, skills or qualifications that should have been included for assessment purposes. Should approval (of the criteria, their weighting and the end scores) be secured, it will leave the employer in a much stronger position to defend contested decisions before a third party.

Rule No. 7 - Allow Representation and an Appeal

Provide for a right to representation and appeal against a decision to select an employee for redundancy. By extending the right to representation, one can avoid a determination like that issued in the claimant’s favour by the EAT in a redundancy scenario in 2014, when it concluded: ‘she was not offered the opportunity of having representation at the aforementioned meeting and at the follow-up meeting … There were no written notes or memos of the said meetings’ (UD143/2014).

Rule No. 8 - Keep It ‘Impersonal’ and Don’t Discriminate

Case law confirms that the definition of ‘redundancy’ has two important characteristics:

(i) ‘change’ and
(ii) impersonality.

With (i) ‘change’, a reduction in employee numbers is required and Covid-19’s impact is likely to enable adherence to this characteristic or criterion.  With (ii) impersonality, the focus is on the redundancy impact on the role/job, rather than the employee. It is only as a consequence of this role/job being made redundant that the employee in that role/job is affected.

Careful consideration is required to ensure that this ‘impersonality’ requirement is met (see St. Ledger v Frontline Distributors Ireland Ltd. [1995] E.L.R. 160). For example, if availing of the interview or the selection matrix option, care must be exercised where employees have been absent from work on maternity leave, a pregnancy-related matter or for a disability-related reason. Such absences should be discounted in redundancy selection scenarios. A related ‘absenteeism’ consideration is that of giving multiple short-term absences a different weighting than a single longer-term absence period, thus reducing the disadvantage to anybody absent recovering from surgery.

Redundancy-related dismissals that fail to meet the ‘reasonable’ requirement or are based upon issues like trade union membership/activity, religion, whistleblowing, civil or criminal proceedings being taken against the employer, race, sexual orientation, age, membership of the travelling community, pregnancy, gender and family or marital/civil status leave an employer legally exposed.

Rule No. 9 - Retain the Records

Keep records of the complete process, as they may be required in evidence before a third party (i.e. to confirm the employer’s legitimate and ‘reasonable’ behaviour/actions). Of course, as one employment law specialist recently pointed out:

‘With new Data Protection legislation and the use of laptops and emails and text messages where such redundancy situations are manufactured it is often relatively easy to acquire the evidence to show that it was not a valid redundancy.’

The records should also provide evidence of adherence to obligations in respect of collective redundancies, as provided for under the Protection of Employment Acts 1977 to 2014. The Acts state that an employer is obliged to give the relevant Minister (a min. of 30 days’) notice with supporting information (see Statutory Instrument 140/1977). The Acts also include an obligation to enter into consultation with the employees’ representatives (with a view to securing agreement) and to provide them with information in respect of the reasons for the redundancies, numbers affected, timescale, selection criteria, payment calculations etc. Notably, the Employees (Provision of Information and Consultation) Act 2006 also obliges employers (of over 50 people) to consult on changes, including collective redundancy proposals. One would do well to heed the Tribunal’s and the WRC’s determinations in this regard, that the consultation must be real and substantial, as opposed to going through the motions or engaging in a box-ticking exercise (see UD329/1997, UD1269/2005, UD206/2011, (2011) 22 ELR 26 and ADJ-00021655 in 2019).

The records should also confirm adherence to the provision of appropriate notice periods, as set down under both the Redundancy Payments Act (i.e. 2 weeks) and the Minimum Notice and Terms of Employment Act (that provides for longer notice periods for longer-serving employees). It is also relevant that an employee cannot be given notice of redundancy whilst on maternity (or additional maternity) leave. In such a scenario, the date of the relevant notice is deemed to be the employee’s expected return to work date, as notified to her employer under maternity legislation.

Conclusion

When it comes to redundancy-related matters, case law serves to confirm that the Unfair Dismissals Act 1977-2011 provides that if the employer’s conduct is unreasonable, they may be liable to an unfair dismissal judgement. The proper application of the 9 rules set down above will enable one to confirm such ‘reasonableness’, showing that decisions were linked to appropriate and non-discriminatory criteria, allowing employers to devote their resources to more pressing matters, like keeping the business afloat.