Economic Restructuring Redundancy+ Transfers Of Undertakings Notes

REDUNDANCY

The law must find a way to address the tension between necessary business restructuring and the adverse individual and social costs of job loss and plant closure.

• Tax payer doesn’t want cost to wider economy from lower productivity, nor increased welfare benefit

The law’s compromise is to provide for:

1. Redundancy payment

2. Fair redundancy selection

3. Consultation

The relationship between redundancy and unfair dismissal can be thought of along a spectrum between flexibility and job security:

Flexibility approach Job security approach

No redundancy and Redundancy situation Unfair dismissal

dismissal fair (for SOSR) but dismissal is fair (compensatory award)

Historical and contextual introduction

• Redundancies occur due to

1. Efficiencies generated as a result of social change, tech developments or corporate takeovers.

2. Reduced demand for ER’s goods/services due to recession/ec slowsown.

3. Overreaching- ie too swift an expansion.

4. Corporate restructuring, reorganisation+ outsourcing ec funtions.

5. Nature of UK economy (‘liberal market economy’) with large corporates characterised by widely dispersed share ownership + strong take over market = less coordination b/w management and labour.

• Pendleton and Gospel – ‘the threat of takeover means that listed companies have to deliver high short-term returns to investors to secure their loyalty…workforces have to be sacrificed when firms face adverse economic circumstances whereas shock is absorbed by capital moreso in countries with coordinated market economies.

• 1965 Act- parl’s policy preference was to compromise b/w demands of taxpayer+ workforceseverance payments were limited to max 15,240so the redundancy payment didn’t discourage EEs from seeking fresh employment (only gives worker a moderate degree of protection).

• Freedland+ Davies say the 1965 Act then getting taken over by UD regime in 1971 Act to give EEs the real protection they deserved (by legislating that a dismissal could be unfair for the reason of redundancy), gave more protection than the 1965 Act which just gave earnings-related redundancy payment and instead did an intensive evaluation of ER’s commercial rationales for the redundancies and to treat those reasons as unfair on the EE. Although, RORR test meant lax intensity of scrutiny.

• Cabrelli: says the UD regime from 1971 Act gives protection not really substantively but in the procedural safeguards it afforded to EEs via the medium of proper selection procedures and advance information and consultation rights

• Current statutory regime constructs a floor of redundancy rights, above which the employer and employee may contractually agree to derogate upwards by enhancing the level of protection.

• Regime set out in Parts X and XI ERA and Chapter II TULRCA offering

1. statutory redundancy payment

2. protection from unfair redundancy and

3. information and consultation rights.

It was introduced to meet UK’s EU obligations under the Collective Redundancies Directive 1975.

The 2 statutory rights enjoyed by EEs on redundancy is (i) the right to be paid a statutory redundancy payment and (ii) the right not to be unfairly dismissed for the reason of redundancy.

The triggers for stat rights on redundancy are that:

1. EE must’ve been dismissed. 2. For the reason of redundancy.

THE 7 REDUNDANCY CRITERIA

NB: these requirements serve two functions: (i) gateway to redundancy compensation and (ii) gateway to potentially fair dismissal.

Dismissal

• Definition in s.136 is broadly similar to definition under s.95 for unfair dismissal.

• Standard dismissal, expiry of Limited Term Contract and constructive dismissal all covered by s.136(1).

• S.136(5) also covers constructive terminations of the contract by virtue of events such as death/bankruptcy – protects EE coz if ER’s death/bankruptcy not covered by this provision it could be argued that the emp contract had been frustrated depriving EE of the right to claim dismissal for the reason of redundancy+ right to statutory redundancy payment.

• Summary dismissal (where EE terminates w/o notice by reason of EE’s conduct) will not be covered (s.140) apart from a few exceptions.

Redundancy

• The definition in s.139 embraces three ideas:

1. the business disappears permanently or temporarily (s.139(1)(a)(i));

2. the employee's workplace disappears (s.139(1)(a)(ii)); and

3. the job disappears (s.139(1)(b)) - generally or just in the place where the applicant was employed to work.

• Language such as ‘intends’ and ‘or are expected to cease or diminish’ means anticipatory redundancy possible ie the business needs have not yet ceased or diminished.

• No need for party seeking to establish ‘redundancy’ to prove that ER was at fault- the legislation is non-fault based.

• NB: The definition of redundancy in s139 ERA relevant in context of EE’s stat right to receive redundancy payment and not to be unfairly dismissed but it has no application to ER’s statutory duty to inform and consult TU/employee reps on the...

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