Today's article looks at the fine details that employers must consider in redundancy situations in order to avoid findings of unfair dismissal and sizeable awards being made in favour of redundant employees.


Gerry Fennell v Resource Facilities Support Limited UD57/2009,

Facts

The respondent (the employer) is a facilities management business that acquired the company for which the claimant (the employee) worked as Area Manager.

In May 2008 and October 2008 the employer decided to restructure its operation and add a Managing Director and extra layer of Operations Directors and Operations Managers. This resulted in the rationalisation of the role of Area Manager and the loss of 13 jobs.

The restructuring was verbally announced on 8 October 2008 at a meeting that was arranged as a training meeting. Staff were given general information about the restructuring which was to take place by consultation and then interview.

On 22 October, the employee attended a consultation meeting where the new positions were explained to him. The employee contended that he was not made aware of the terms and conditions of the new roles. Following this meeting his solicitor wrote to the employer asking for information on the proposed restructuring and the positions available. The employer believed that this information was contained in the handbook given to the employee at the meeting and took it as an indication that the employee did not want to be considered for the role. The employee did not apply to be interviewed for the roles as he felt that there would be a response to his solicitor’s letter.

The employer rang the employee on 30 October 2008 to inform him that as he had not applied for the roles he was being made redundant.

Determination

The Employment Appeals Tribunal (the "EAT"), which was chaired by Mr T. Taaffe in Dublin on 15 December 2009, found that the redundancy of the employee was an unfair dismissal within the meaning of the Unfair Dismissals Acts 1977 to 2007 and awarded the employee €87,000, inclusive of a redundancy payment of €3,000 made to the employee on termination of his employment.


Patrick O’Driscoll v CIL Precision Limited UD1176/2008

Facts

The claimant (the employee) worked as a General Manager for the respondent (the employer) from April 2007 to July 2007.

The sale of the business to a third party had been agreed for June 2008 but it fell through at short notice prompting the employer to restructure the company. The employee had expressed an interest in purchasing the company but did not make a formal written offer.

The employer examined the various restructuring options available and decided to make the position of General Manager redundant. The employer had previously operated without a General Manager and at the time of the hearing the position had not been re-filled.

The employer met with the employee to inform him of its decision and subsequently wrote to the employee outlining the issues raised at the meeting. The employee was invited at both the meeting and in the letter to identify if there was any way the redundancy could be avoided. The employer considered a letter and subsequent meeting with the employee before deciding to preserve its initial decision. The employee was paid six months pay in lieu of notice and a payment of €33,000 based on a June 2008 profit share.

Determination

The Employment Appeals Tribunal (the "EAT"), which was chaired by Mr J. Sheedy in Waterford on 15 June 2009 and 10 September 2009, found that the employer did not follow fair procedures in selecting the employee for redundancy and that sufficient efforts were not made to consider other alternatives and awarded the employee €20,000 under the Unfair Dismissals Acts 1977 to 2007.


Legal Review

Firstly, it is critical that employers realise that positions are made redundant, not people. An employee cannot be made redundant based on their performance or conduct. Indeed, an employee can only be dismissed by way of redundancy if it is based “wholly or mainly” on five main factors. These factors include that the purpose or location of the business has changed, that the business no longer needs the same number of employees or that a change in work being done is incompatible with the employee’s skills.

An overview of Fennell and O’Driscoll would seem to suggest that fair redundancies existed. In both these cases the employer made an economic decision that their business no longer required the same number of employees. However, it is not enough for an employer to simply contend that a genuine redundancy situation exists and dismiss the employee.

An employer must also show that the employee in question was fairly selected for redundancy. While the redundancy legislation does not define “fairness” the Tribunal noted in Fennell that the Unfair Dismissals Acts allowed the Tribunal to consider the “reasonableness or … conduct” of the employer.

In Williams v CompAir Maxam Ltd the English EAT laid out what are generally accepted principles of how an employer should act in a redundancy situation. Browne-Wilkinson J held that an employer must give staff as much notice as possible of potential redundancies and should consult with employees “as to the best means by which the desired management result can be achieved fairly with as little hardship to the employees as possible”. The employer should seek to agree a selection criterion with the employees but in the absence of agreement any criteria should be objective. The employer should ensure that any selection for criteria is made in accordance with those criteria. Finally the employer should evaluate whether it is possible to offer the employee alternative employment.

As the decision in Fennell demonstrates there is a heavy onus on employers to prove that they acted reasonably and fairly towards the employee. The Tribunal found that while a redundancy situation did arise the employer failed to treat the employee fairly. In particular, the Tribunal censored the employer for failing to consult or engage with the employee prior to the restructuring announcement. Furthermore, the employer implemented the restructuring process in an unfair manner and failed to properly inform the employee of the procedures it had adopted.

In O’Driscoll the Tribunal also felt that the employer failed to follow fair procedures in selecting the employee’s position for redundancy. In particular, the Tribunal censored the employer for not giving enough consideration to other alternatives to reaching the cost saving required. The decision in O’Driscoll suggests that employers must show that they have explored other avenues to save costs and that redundancy is the last and not first resort.