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Summary Redundancy (LLB Notes)
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Redundancy notes from the employment law module at City university
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REDUNDANCYEmployment Regulation Act 1996 – s.163 (sets out how a person is made redundant)
Eligible employee dismissed by redundancy, is as a minimum, entitled to statutory redundancy
A redundancy payment is the reward for “past service” so an eligible employee is entitled to
receive the full payment even if he finds another job immediately
Eligibility
Employees MUST have 2 years continuous employment to be eligible to claim a redundancy
payment (ERA 1996 s.155) sometimes left + come back this is not continuous
Note: where an employee is dismissed by reason of redundancy –may also claim unfair dismissal
Definition of redundancy – s.139 ERA 1996
Redundancy as a reason for dismissal depends on if definition applies to factual circumstances
s.139 ERA
An employee is dismissed by reason of redundancy if dismissal is attributable wholly or mainly to:
(1) Fact employer has ceased, or intends to cease (a) to carry on business for purposes of which the
employee was employed, or (b) to carry on business in place where employee was employed, or
(2) Fact the requirements of that business (a) for employees to carry out work of a particular kind, or
(b) for employees to carry out work of a particular kind in the place where then employee was
employed by the employer have ceased or diminished or are expected to cease to diminish
Definition applies in 2 main cases –whole business closes down + where business carries on
(sometimes actually expands) but requirement people to perform certain services cease or diminish,
this can happen generally or just in the place the applicant was employed to work
3 main categories for Redundancy
1. Job Redundancy – cessation of business.
2. Place of Work Redundancy – cessation or reduction in work at place of employment.
3. Employee Redundancy – reduction in requirement for employees to do work of a particular
kind.
Closure of business
s.139(1)(a)(i) ERA 1996 states an employee who is dismissed by reason of closure of employer’s
business will be dismissed by reason of redundancy. This will be the case whether the cessation is
permanent or temporaryWork has ceased, cessation of business – so where an employee is told to
leave of the business closing down, cessation can be temp or permanent
Place of Work Redundancy (‘in the place where the employer was so employed’)
s.139(1)(a)(ii) ERA 1996 allows for redundancy if place where employee is employed is relocated
Bass Leisure v Thomas: EAT held employee’s place of work, for redundancy, is a question of
“fact” taking into account where employee “actually” worked –remember may have a clause
where place of work is, but also from time to time might work in other branches
Decision approved by COA in High Table Ltd v Horst [1997]
High Table Ltd v Horst: 3 employees worked for High Table who provided catering services for
city companies, always worked at Hill Samuel site but their contracts did contain a mobility
clause. Hill Samuel had reduced their requirements and applicants all dismissed held for
redundancy, an employee’s place of work was not solely decided by reference to contract of
employment but place where employee actually worked. A factual enquiry of employee’s fixed
place or changing places of work, contractual terms which may assist.
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,Position to be considered therefore is – from High Table
If employee worked in 1 location, that is his place of work, regardless of any mobility clause;
If an employee has worked from several locations, place of work to be established by a factual
enquiry, contractual terms that might assist in evidencing his place of work, i.e. a mobility clause
Diminished requirements for employees to do work of a particular kind
s.139(1)(b) ERA 1996 covers reason for dismissal being a requirement for an employee to do a
particular kind of work which has ceased/diminished. (E.g. a specialist in hairdressing and really
good at blowdrying, requirement ceased, then employer has right to make redundant)
Such as the employees job has ceased through lack of work but it can apply to other scenarios
such as: work of a particular kind / surplus employees / bumping
Work of a Particular Kind
If nature of work has changed so fundamentally that work of a particular kind has ceased or
diminished, even though it has been replaced by different work, this will amount to redundancy
Murphy v Epsom College: employer installed new heating system, plumber was replaced by a
heating technician held to have been made redundant (dismissal was for redundancy because
employer no longer needed employee to carry on work of a particular kind)
Historically there have been two conflicting tests to determine whether work of a particular kind
had ceased or diminished – contract test or function test
Contract test: focuses on how duties of employee are defined in contract (so first see this)
Function test: focuses on how duties are actually performed by employee (what they actually do)
According to the contract test, if the duties are narrowly defined as the actual job being carried
out and that has gone, the employee is redundant.
However if duties are widely defined in contract, whilst job performed by employee may have gone,
there may be other jobs for the employee to do under terms of contract (THEN NOT REDUNDANCY)
Haden Carrier v Cowan: Mr Cowen employed as a divisional contracts surveyor, made redundant
when company's requirements for a divisional contracts surveyor ceased. However, his employment
contract stated Mr Cowen be required to undertake "all duties which reasonably fell within the
scope of his capabilities” It means an employee cannot be made redundant unless you can show a
diminution in your requirements for both work employee actually did, and any other work he could
contractually be required to do
Safeway Stores v Burrell: however EAT stated that neither the contract or function test should be
applied. Judge Peter Clark established a three stage test:-
He said, under s.139(1)(b) a three stage process should take place:
1) Was the employee dismissed, if so;
2) Had the requirements of the employer’s business for employees to carry out work of a particular
kind ceased or diminished, or were they expected to cease of diminish? If so,
3) Was the dismissal caused wholly by that state of affairs?
Murray v Foyle Meats –Lord Irvine held redundancy definition in s.139(1)(b) “simplicity itself and
asks 2 Qs of fact. (1) Whether requirements of business for the employee to carry out work of a
particular kind have diminished. (2) Is whether dismissal is attributable, wholly or mainly to that
state of affairs. This is a question of causation.”
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, By focusing on causation, a dismissal will now be by reason of redundancy if it is attributable to the
business’ diminished need for employees to do work of a particular kind.
Shawkat v Nottingham CC: COA held a thoracic surgeon, following a re-organisation, was asked to
carry out cardiac surgery (not his speciality) in addition to thoracic surgery was held not to be
redundancyrequirement for thoracic surgery still needed – it had just diminished. (So fact he was
told to do other work and not his own mean no redundancy because he still did his own work and
the other work was just in addition to his work so not redundancy by reason of redundancy)
NOT all ‘re-organisations’ will amount to redundancies. Any restructuring must fall within definition.
If e.g. employer dismisses employee + replaces with less well-paid employees= NOT redundancy
Surplus employees
Requirement for employee may have finished, even if same amount of work is still being done
(a) New technology means some employees are dismissed;
(b) Initial overstaffing may mean fellow employees can absorb work done by dismissed employee;
(c) Re-organisation of work methods introduce more efficient system requires less manpower
(Technology e.g. in car factory so less staff, or over staffing initially, or re-organisation with a more
efficient system e.g. people working from home)
Bumping
Bumping occurs when 1 employee’s job (A) disappears and that employee is given another’s job (B),
and that other, (B), is made redundant.
Gimber & Sons v Spurrett: held dismissal of B was by reason of redundancy under “work of a
particular kind” under s.139 (1)(b) – so bumping is permitted within legislation + under this provision
Safeway Stores v Burrell: HOL held bumping dismissals are dismissals by reason of redundancy, HOL
again confirmed this Murray v Foyle Meats: where it said that wording of s.139(1)(b) can include
‘bumping’ redundancies (can be bumped out of one’s position and be made redundant, not unfair)
Redundancy payment
Redundancy payment is intended to compensate employee for loss of job. If an employee is re-
employed by his employer or by an associated employer he is not entitled to redundancy
s.141 ERA 1996 provides if employee is offered a job loses entitlement to redundancy payment
Offers to Re-new or Re-engage
Offer to renew is offer to employee of old job back, i.e. new business deal + work increases again.
An offer of re-engagement involves a different job with same or associated employer
Note: if dismissed by reason of redundancy, an employee loses his entitlement to a redundancy
payment if he unreasonably refuses an offer of suitable alternative employment (s.141 ERA)
E.g. on 2008 the financial crisis, people in the city were made redundant, but the next week even
people got re-engaged – so had a redundancy payment and were re-engaged
S.141 ERA 1996
s.141(2)(4), employee not entitled to redundancy payment if unreasonably refuses oral/ written offer
(a) Made by his employer or an associated employer; and
(b) Made before the contract of employment comes to an end;
(c) To re-employ him in the same or some other suitable employment;
(d) Provided renewal or re-engagement is to take effect within 4weeks of end of original contract
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