Question:
In relation to employment law, explain the meaning of redundancy and the rules which govern it.
Answer:
Redundancy is defined in s.139(1) Employment Rights Act (ERA) 1996 as being: 'if the dismissal is wholly or mainly attributable to:
(a) the fact that his employer has ceased, or intends to cease,
(i) to carry on the business for the purposes of which the employee was employed by him, or
(ii) to carry on that business in the place where the employee was so employed, or
(b) the fact that the requirements of that business
(i) for employees to carry out work of a particular kind, or
(ii) for employees to carry out work of a particular kind in the place where the employee was so employed by the employer, have ceased or diminished or are expected to cease or diminish.
In order to qualify for redundancy payments, an employee must have been continuously employed by the same employer or associated company for a period of two years. At the outset of redundancy proceedings the onus is placed on the employee to show that they have been dismissed, which they do by demonstrating that they are covered by s.136 ERA 1996, which provides four types of dismissal. These are:
(i) the contract of employment is terminated by the employer with or without notice;
(ii) a fixed term contract has expired and has not been renewed;
(iii) the employee terminates the contract with or without notice in circumstances which are such that he or she is entitled to terminate it without notice by reason of the employer's conduct;
(iv) the contract is terminated by the death of the employer, or the dissolution or liquidation of the firm.
Once dismissal has been established, a presumption in favour of redundancy operates and the onus shifts to the employer to show that redundancy was not the reason for the dismissal.
Employees who have been dismissed by way of redundancy are entitled to claim a redundancy payment from their former employer. Under ERA 1996, the actual figures are calculated on the basis of the person's age, length of continuous service and weekly rate of pay subject to statutory maxima. Thus employees between the ages of 18 and 21 are entitled to ? week's pay for each year of service, those between 22 and 40 are entitled to 1 week's pay for every year of service, and those between 41 and 65 are entitled to 1? weeks' pay for every year of service.
The maximum number of years service which can be claimed is 20 and as the maximum level of pay which can be claimed is ￡430, the maximum total which can be claimed is ￡12,900 (i.e. 1·5 x 20 x 430).
Disputes in relation to redundancy claims are heard before an Employment Tribunal and on appeal go to the Employment Appeal Tribunal. The employer must act as would be expected of a 'reasonable employer' and in determining whether the employer has acted reasonably, the Employment Tribunal will consider whether, in the circumstances 'including the size and administrative resources of the employer's undertaking, the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee' (s.98(4) ERA 1996). Reasonable employers should follow the ACAS Code of Practice on Disciplinary and Grievance Procedures in relation to the way they discipline and dismiss their employees. Thus redundancy, per se, does not provide a justification for dismissal, unless the employer had introduced and operated a proper redundancy scheme, which included, preferably, objective criteria for deciding who should be made redundant, and provided for the consideration of redeployment rather than redundancy.
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