Deutsche Bank has recently announced that it will make as many as 18,000 of its staff redundant by 2022. No matter which circumstance triggers a mass (or collective) redundancy, it is one of the five fair reasons to dismiss an employee. This article considers how employers can ensure redundancies they need to make are fair, reasonable and compliant.
Since mass redundancies in finance and retail in the aftermath of the 2008 financial crisis, there have been further developments in the law which means employers have a host of employment law intricacies to navigate to ensure they are not exposing their business to successful claims against them. There has also been a significant change in the attitude employees have towards challenging decisions with a greater willingness and aggression in doing so. In addition, there is a much greater awareness of mental health and disability issues, and the additional implications this brings to play.
Where there are more than 20 employees who could be made redundant, within a 90-day period, at one establishment, the employer has additional obligations under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULCRA). As a consequence, the employer must consult on its proposal to make redundancies with elected representatives of the affected employees. It must also notify the Department for Business, Energy and Industrial Strategy (BEIS) and a failure to do so could result in criminal prosecution.
Employers should be careful to ensure that they identify the correct pools of employees to select from and to consider if ‘bumping’ is appropriate. It’s also important to consult on the selection criteria and make sure it is objective. With mass redundancies, this consultation will take place with the elected representatives of the affected employees.
Employers should use a selection matrix containing a number of selection criterion rather than just one to reduce the risk of discrimination and ensure staff who are scoring employees against the criteria are trained on how to apply it fairly avoiding unlawful discrimination.
Many employers still believe using “First in, Last out” as a selection criterion is the simplest and fairest way. This is not recommended as it potentially discriminates both on the grounds of age, disadvantaging younger employees, and on the grounds of sex, as women are more likely to take career breaks.
How to avoid discrimination claims
When preparing and applying selection criteria, employers need to be careful to avoid choosing based on any of the protected characteristics under the Equality Act 2010 otherwise they could face discrimination claims.
The scope of discrimination has also been widened since 2008 to include two more forms of discrimination: associative discrimination (treating people less favourably because of their association with someone with a protected characteristic, for example the carer of a disabled person); and perceptive discrimination (treating a person less favourably because they are perceived to have a protected characteristic, even if in fact they do not have that characteristic).
Employers should be wary of indirectly discriminating by having a particular selection criterion which has a disproportionate effect on one group. For example, basing a decision on flexibility in relation to working hours could adversely affect women or single parents.
Employers should also be cautious of using sickness absence when making decisions as time off in relation to pregnancy-related sickness would constitute sex discrimination. Similarly, if an employee’s health condition (whether this is a physical or mental health condition) could be classed as a disability, they have additional protection from discrimination on the basis of that disability as a consequence of the Equality Act 2010. This means time off in relation to their disability should not be included in redundancy selection criteria.
Some other considerations
A fair redundancy procedure should also include employers taking steps to find alternative employment for affected employees with the employer itself and, where appropriate, within any associated entity. An employer will need to consider whether or not reasonable adjustments need to be considered and made to enable a disabled employee whose role is at risk being able to carry out another role rather than being selected for redundancy. Case law has made it very clear that the obligation is now on the employer to ‘consider’, as well as make reasonable adjustments, which places a more onerous obligation on employers than existed in 2008.
The complexities of different pieces of legislation overlapping within a redundancy scenario mean that implementing redundancies should not be seen as a quick or easy solution. Coupled with an increasingly litigious workforce, who are prepared to challenge and highlight perceived inequalities and discrimination more than ever before, employers need to tread carefully and seek expert advice to ensure they aren’t exposing their business to unnecessary risk.
Pam Loch is an award-winning employment lawyer, entrepreneur, and the founder of Loch Associates Group. Having started out in the accountancy and pensions sectors, Pam retrained and qualified as a Solicitor in both Scotland and England & Wales and has specialised in employment law for 20 years.
Her passion for finding solutions to help businesses manage and look after their people is reflected in the development and success of the Loch Associates Group since she set it up in 2007. Today, the Loch Associates Group works with businesses of all sizes from across the UK providing employment law advice, HR support and health & safety consultancy, as well as wellbeing and mediation services.