Redundancy in the time of Coronavirus

Posted on August 19, 2020

Belinda Lester, Solicitor and MD at Lionshead Law Ltd

There is no doubt that we are living through some of the most challenging times in human history.  Whilst we have lived through countless wars and famines, we have always done so with the physical support of our fellow humans; now we are being asked to stay away from one another and this has had the most extraordinary impact on not only individual health and wellbeing but also on jobs.

Whilst the Government has tried to bolster the economy by introducing the furlough (and now, flexible furlough) scheme and other grants for businesses and the self-employed, there is no doubt that the challenges to businesses have been extreme and, for a very large number, have led to their total collapse and consequently to the loss of jobs for all their employees.  Whilst extremely distressing for those individuals concerned, at least from a legal perspective, provided collective consultation obligations were carried out, there is unlikely to be any scope for saying that those types redundancy dismissal are unfair.  If a company goes bust then redundancies are clearly an inevitable consequence unless the company goes into administration and is transferred to a third party buyer (in which case employment will transfer but may well result in redundancies either before or after the transfer).

However, what of the situation where businesses are struggling financially and decide that they need to trim costs by getting rid of staff?  Are those redundancies still fair?  There are several issues to consider:

  • Do jobs have to be cut to save the necessary costs or can other measures be taken?

Before conducting redundancies, employers must consult affected staff.  If they are contemplating making more than 20 people redundant, they need to engage in collective consultation before then moving on to individual consultation.  But what does consultation mean?  Many employers treat it is a tick box exercise and consult only when the decision to cut jobs has already been taken but that is not what it is intended to be and is really too late.  The purpose of consultation is first and foremost intended to as a way of establishing whether there is any way in which redundancies can be avoided or at least the number of redundancies proposed reduced.  The only way to determine that is to consult staff about other steps that can be taken to save jobs and, in fact, the Government’s furlough scheme was designed to be just such a step.  The question is whether employers who are still able to benefit from that scheme (albeit no longer at no financial cost to themselves) can be certain that any redundancies made at this time are fair.  Many employees are rightly concerned when they are made redundant whilst still on furlough leave as they feel that their employers have decided to cut jobs at a time when they are still able to benefit from the Government scheme and don’t, therefore, need to make those costs savings.  Whilst that may well be true in a small number of cases, I think it will be quite difficult to challenge redundancies on that basis.  The scheme is not a “no cost” option for employers and many know that, even by October, their businesses will not have bounced back to pre-Covid-19 levels and, as such, they need to start implementing major cost savings and restructures now.

However, that doesn’t get employers entirely off the hook.  There are many ways to make cost savings which don’t involve compulsory redundancies.  Below are some options which should normally be considered and staff consulted on, particularly where the reason for the redundancies is not a need to reduce headcount but simply a need to reduce overheads.  These could include:

  1.  Asking staff if they want to go part-time and job-share with another part-timer
  2. Asking staff if they would be willing to consider a temporary pay cut or reduced benefits (if the company provides expensive benefits)
  3. Seeing whether anyone would like to take a few months’ unpaid sabbatical with a guaranteed return to their old job at the end.
  4. Asking whether anyone would like to take voluntary redundancy
  5. Reducing office space (and office rent) and allowing more staff to work from home or to rotate staff into the office with hot desks – the excuse of home working not being suitable is not really going to fly any longer for most employers.

These are just a few suggestions but if an employer embarks on a redundancy consultation exercise, it is always worth raising these alternatives during the consultation process and, specifically, asking whether these options were considered by the company in advance of the redundancy consultation process.

  • If jobs do need to be cut, what happens to the staff who are retained?

When redundancies are made for cost-cutting reasons and not because of business re-organisation or changing business needs then this frequently results in an increased workload for the staff who are retained.  Companies need to be particularly mindful of this, especially with respect to those staff whose contracts of employment set out very clearly defined job titles and job descriptions.  In those instances, the requirement for staff to take on more work without obtaining prior agreement could potentially lead to claims of breach of contract/constructive dismissal.  That is also the case for employees without clearly defined job descriptions as ultimately, there is an implied duty of mutual trust and confidence between employer and employee.  Therefore, in a situation such as this, companies should not only be consulting staff who are at risk of redundancy, they should also be consulting staff who are going to be covering the work left by those made redundant and ensuring that they get their agreement to the changes.  They may find that they make large numbers of people redundant, those left behind are overwhelmed with work and feel undervalued so resign thereby leaving their employers with the problem of not only not having enough money but also not having enough staff.

  • Ensuring that the correct pools for selection are chosen and that selection criteria are fair and non-discriminatory

As with all redundancies, employers need to ensure that they are putting the right people at risk and are then applying fair and non-discriminatory selection criteria to those people before finalising whose job is to go.  In addition, they must ensure that any women who are on maternity leave are offered any suitable alternative employment on no less favourable terms and conditions if they determine that the jobs they were doing are no longer required.  It may be safer, when making redundancies for costs savings rather than due to genuine business reorganisation reasons, to retain the jobs of any women who are on maternity leave and to try and find costs savings elsewhere in order to avoid the risk of claims of direct maternity discrimination.  The risk is significant as many employers will decide that they have managed without the woman on maternity leave for several months and therefore can manage without her indefinitely.  That is dangerous, however, as the only reason they have managed without her is because she is on maternity leave – therefore “but for” the taking of maternity leave, that woman would not be at risk of redundancy and that is clear direct maternity discrimination.

Ultimately, redundancy in the time of Coronavirus, whilst sadly a lot more frequent, is not a process which should be undertaken by employers any more lightly.  Just because redundancies are expected by many employees (particularly those on furlough leave), that doesn’t mean that they will accept that their own selection was fair or untainted by discrimination.  It is always important to conduct a full, fair and transparent process.  Alternatives to redundancy must be considered and staff must be consulted.  Only then should the selection criteria be applied and, where applicable, suitable alternative roles considered.

Belinda Lester

Solicitor and MD of Lionshead Law Ltd

This is not intended to be legal advice and should not be relied upon.  If you have been made redundant or are being considered for redundancy or are an employer embarking on a redundancy process, you should obtain legal advice specific to your situation.

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