Economic downturns, reorganisations and other business circumstances may create a genuine redundancy situation in a business. The mishandling of a genuine redundancy can however give rise to a claim in unfair dismissal, which potentially can expose an employer to substantial compensation awards.

An employee who has been in the continuous employment of an employer for two years or more has the right not to be unfairly dismissed. For a dismissal to be fair, the employer must have a ‘potentially fair’ reason for the dismissal and must have acted reasonably in so doing. The Employment Rights Act 1996 (‘the Act’) sets out six potentially fair reasons for a dismissal, one of which is redundancy.

The Act recognises four situations which can give rise to a dismissal on the grounds of redundancy. They are:

• the cessation of the business for which purpose an employee is employed
• the cessation of business in the place where an employee is employed
• the diminishing requirement for an employee to carry out work of a particular kind
• the diminishing requirement for an employee to carry out work of a particular kind at the place where an employee was employed

However, an employer has a duty to act reasonably in all the circumstances of the case and in practice, this means a fair redundancy procedure must be applied. A failure to follow a fair redundancy procedure can turn a potentially fair dismissal into an unfair dismissal and is a common reason for a finding of unfair dismissal by Employment Tribunals.

In certain circumstances, it may be appropriate for an employer to consider using a settlement agreement, either as an alternative to the redundancy procedure or to conclude a redundancy process with an employee. An employee who enters into a valid settlement agreement is deemed to have legally waived his or her statutory claims against his or her employer. Settlement agreements are complex documents and must fulfil certain criteria to be valid in law.

How can London Registrars help?

Our highly experienced team can provide practical and legal advice on handling redundancies, such as:

• circumstances that give rise to genuine redundancy situations
• possible alternatives to making redundancies
• fair redundancy procedure
• fair selection, including advice on the pool of selection, the selection criteria, and the manner of selection
• conduct of consultations
• vetting or drafting redundancy letters
• vetting or preparing minutes of meetings
• providing redundancy policies for business concerns
• providing practical advice on the preparation of settlement agreements

If you would like to discuss your company’s position vis-à-vis potential redundancies and the procedures that may be necessary, please Contact us.