Redundancy existed where business owner decided to take over managing director’s work

EAT: An employer’s motive and conduct in making a role redundant is not relevant to determining if a redundancy situation exists.

The statutory definition of redundancy set out in the Employment Rights Act 1996 (‘ERA’) identifies three sets of circumstances in which a redundancy arises, one of which is where there is a diminished requirement in the business for employees to do work of a particular kind (‘diminished requirements’).

Employees have the right not to be unfairly dismissed. Dismissal for redundancy is a potentially fair reason, provided the decision to dismiss is fair in all the circumstances. Because of this interaction between redundancy and unfair dismissal, it is not uncommon for employees to bring unfair dismissal claims on the basis that either:

- there was no redundancy situation;

- redundancy was not the real reason for dismissal; and/or

- the dismissal was not fair in all the circumstances.

A recent case highlights that even employment judges can be caught out by confusing these key questions.   

Case: Berkeley Catering Limited v Jackson

Mrs Jackson was the Managing Director of BCL. The owner of BCL named himself Chief Executive Officer and began undermining Mrs Jackson’s role by taking management decisions and control of wider business operations. The CEO told Mrs Jackson that he intended to take over from her as MD.

BCL sent Mrs Jackson an ‘at risk of redundancy’ letter and a meeting was held at which Mrs Jackson was told there was no suitable alternative role for her. Mrs Jackson was subsequently made redundant and paid a statutory redundancy payment. Subsequently, Mrs Jackson became aware that the role of Events Director, which she viewed as a suitable alternative role, had been filled by a new employee.

Mrs Jackson brought a claim for unfair dismissal, stating that she had been removed from her position by the CEO and as there had not been a diminished requirement for her role within BCL, there was no redundancy. As an alternative, Mrs Jackson argued that her redundancy procedure was unfair because a suitable alternative to redundancy was available but had not been offered to her.

The tribunal judge ruled that the actions of the CEO were clearly taken with a view to removing Mrs Jackson from BCL, which he did by taking over the MD’s functions. The tribunal judge took the view that this did not demonstrate a diminished requirement in work undertaken by the MD because, in effect, the various duties and functions of that role continued to exist. This, the tribunal judge held, meant there was no redundancy, and that Mrs Jackson was unfairly dismissed. BCL appealed.

The EAT directed itself to the definition of redundancy in the ERA and the key cases of Safeway Stores Plc v Burrell [1997] and Carry All Motors Ltd v Pennington [1980] in which the courts had identified the relevant approach to take in respect of ‘diminished requirements’ redundancy scenarios. In particular, the case of Safeway stressed that the question is not whether there was a decreased amount of relevant work (in this case, the MD role) but whether there is a decrease in the number of employees required to do that work.

In the EAT’s view the tribunal fell into the error highlighted in Safeway because the undermining of Mrs Jackson was not relevant to the question of whether a redundancy situation existed. The EAT felt the tribunal judge may have been distracted by the question of whether there was a ‘genuine redundancy situation’ for the purposes of Mrs Jackson’s unfair dismissal claim and pointed out that the definition of a redundancy situation under the ERA either existed or it did not. In addition, the law does not interfere in how an employer chooses to organise itself. If a decrease in the requirement for employees to do a particular kind of work occurs, for example because of recruitment or due to a reorganisation of roles, the motive behind this is irrelevant for the purposes of determining whether a redundancy situation exists.

The EAT made clear that an employer’s motives and actions were relevant when considering whether a dismissal is fair in all the circumstances, including whether the decision to dismiss and the process followed were reasonable. Motive is also relevant when considering whether redundancy was the real reason for dismissal.

The EAT found that a redundancy situation arose in respect of Mrs Jackson and remitted the case back to a different employment tribunal to determine if the redundancy was the reason for Mrs Jackson’s dismissal and, if so, was the decision to dismiss for redundancy fair in all the circumstances.

Comment

This case highlights the subtle yet crucial guidance in Safeway that the question needing to be asked is not whether there has been a decrease in the amount of relevant work, but whether there is a decrease in the employer’s requirement for employees to do that work. In this case, that distinction was key to determining whether the definition of redundancy was met under the ERA.

Case law has long established that tribunals will not generally interfere with business decisions to reorganise roles or redistribute work leading to redundancies, which the EAT in this case addressed when it said in its judgment that “[I]t is open to an employer to organise its affairs so that its requirement for employees to carry out particular work diminishes.”

In this case, it remains open for the reconstituted tribunal to find that the dismissal was unfair based on the failure to offer the employee the apparently suitable alternative role.