Today's article concerns fair selection for lay-off and/or redundancy

Case Name and Reference: Paudie Collins v Mike Cronin & Sons Limited (UD 1180/2009) (MN 1186/2009)
Court or Tribunal: Employment Appeals Tribunal (“EAT”)
Legislative Reference: Unfair Dismissals Acts, 1997 to 2007 (the “Acts”) and Minimum Notice of Working Time Acts, 1973 to 2005.
Jurisdictions/Subject Matter: Lay-off and Redundancy Selection

Facts

The claimant was employed as a machine operator and a truck driver by the respondent. From the beginning of 2008, the claimant was principally employed to operate machinery for a project for Tralee Town Council. The respondent had seven other machine operators, three of whom were the managing director’s (the “MD”) sons. Apart from the MD’s sons, the claimant was the longest serving employee. The claimant had no written contract of employment.

In December 2008, the respondent became aware that their tender for the provision of service to the County Council was unlikely to be successful. The work for the County Council represented 30% of the respondent’s workload. The claimant was notified of the unsuccessful tender.

On the 19 January 2009, the respondent issued a letter to the claimant stating that it would not be able to offer him full-time employment for the foreseeable future. The claimant was laid off on 20 January 2009. The claimant, assisted by a union representative, drafted a letter to the MD asserting that as he was one of the longest serving employees, workers with shorter service should be put on lay-off first. The claimant asserted that the MD told him that a particular machine operator was married and therefore there was no work for the claimant.

Subsequently, the MD offered the claimant the option of returning to work at a 30% reduced rate of pay but the claimant refused on the basis that such a pay cut was not being imposed on other employees.


Determination

The Employment Appeals Tribunal, which was chaired by Mr. J. O’Connor in Tralee on 20 May found that a redundancy situation did exist in the respondent and other operators were laid off at the same time as the claimant. However, the Tribunal was not satisfied that the selection for redundancy of the claimant was fair. In particular, the Tribunal referred to the fact that the MD said the machine operator was retained due to his marital status which is not an objective criterion for selection for redundancy. The claimant’s dismissal was held to be unfair and an award of €12,000 was made under the Acts. The claimant was also awarded €1,719 to compensate for the lack of notice given by the respondent.


Legal Review

There is an element of ambiguity in the above case, in that it is not clear whether the claimant was initially laid-off or whether in fact he was made redundant.


Lay-off

Where an employer genuinely believes that a reduction in workload is temporary and that business will pick up in the near future, the employer may place employees on a period of lay off without pay as an alternative to redundancy. Employees may claim social welfare during this period.

Strictly speaking, from a legal perspective, employers should reserve the right to lay employees off without pay within the contract of employment. Otherwise, the employer must obtain the employee’s express consent to do so.

For an employee to be entitled to claim redundancy, the employee must qualify for redundancy and have:

* Been laid off for 4 consecutive weeks or for a total of 6 weeks in any period of 13 weeks; and
* Given a written notice of intention to claim a redundancy payment or notice terminating the contract of employment to the employer.

Notice must be given within 4 weeks of the last week since being laid off.

Employers can contest such redundancy payments but the employer must serve a counter notice in writing within 7 days of receiving the employee’s notice of intention to claim redundancy. Where such a counter notice is issued the employee will not receive redundancy payment unless the employee applies successfully to the Employment Appeals Tribunal.

Employers would normally only contest the redundancy on the grounds that at the date of service of the notice of layoff a return to normal work was reasonably expected within 4 weeks and that normal work was likely to continue for at least 13 weeks from the date of resumption. However, after the employer serves the counter notice, if the employee is still laid off for 4 consecutive weeks from the date of his notice to the employer, the employee will be entitled to redundancy payment.

When selecting employees for lay-off, an employer should apply the same selection criteria as used for redundancy. The fairness and reasonableness of an employer’s decision to make a particular employee redundant is the central issue to be determined in such cases and correct procedure must be followed at all times.


Redundancy

In relation to making employees redundant, it is of paramount importance that an employer can show that a genuine redundancy situation exists. The Tribunal accepted that this was apparent in the above case. However, they were not satisfied that the dismissal of the claimant was fair and resulted wholly from the redundancy situation. The MD said that machine operator was retained due to his marital status which is not an objective criterion for selection for redundancy.

In the absence of a binding company policy or collective agreement to be followed when selecting employees for redundancy, employers should establish clear and objective selection criteria to ensure fairness and protect against any future unfair dismissal claims. A skills matrix against which each individual employee is evaluated is a very useful way of achieving reductions in any business. It is crucial that the criteria adopted are not unreasonable or directly or indirectly discriminatory in any way.

The “last in first out” or “LIFO” rule is a commonly used mechanism to select employees for redundancy where there is no other basis for distinguishing between employees. However, it is often an unsatisfactory method for employers as it does not take account of skills or experience.

It is vitally important as an employer that you document and are able to demonstrate the rationale for all your decisions to enable you to defend any subsequent unfair dismissal claims.