In the context of the ongoing COVID-19 pandemic, many employment practitioners are seeing an increase in instructions relating to redundancy processes. The first stage of the enquiry any employment tribunal would undertake into such a matter is to consider whether the dismissal was actually by reason of redundancy. This blog post addresses what is necessary to constitute a redundancy situation and considers in particular the recent guidance provided by the EAT in Berkeley Catering Ltd v Jackson UKEAT/0074/20.
Redundancy (as a potentially fair reason for dismissal) is defined in section 139 of the Employment Rights Act 1996 (ERA 1996). A dismissal wholly or mainly attributable to the fact that the requirements of the business for employees to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish will be by reason of redundancy for the purposes of the ERA 1996 (section 139(1)(b)(i)).
There are several principles that were well established before Berkeley Catering that we should have in mind before turning to the facts of that case. The first is that the tribunal is not permitted to investigate the commercial and economic reasons for the redundancy (see for example James W Cook & Co (Wivenhoe Ltd) v Tipper and others [1990] ICR 716). It is still open for employees to challenge whether there was actually a redundancy situation at the time of their dismissal, and the court in Tipper envisaged that the tribunal could consider “whether the closure of a business is in fact genuine”, but the scope of the tribunal’s investigation will be fairly limited. Where the claimant alleges that the redundancy situation was a sham or completely fabricated, one may see the question of whether there was “a genuine redundancy situation” included on the tribunal’s list of issues.
The second is that what is required by section 139 is a reduction in the requirements of the business for employees to carry out work of a particular kind. This requirement can be satisfied where the amount of work is not reduced but the number of employees required to do the work is, such as, for example, where an employer seeks to reduce costs by transferring the responsibilities of one employee to another and making the former redundant (see Safeway Stores plc v Burrell [1997] ICR 523).
The facts in Berkeley paint an unattractive picture of the employer’s position. The employment tribunal judgment states that the owner of the company “was cutting the claimant out of the business and undermining her as MD. He also frankly admitted that this was happening without her being informed” (paragraph 50). The employment tribunal also found that there was no evidence of a diminishing need for senior staff and no good evidence of a financial need to cut costs. Essentially, the owner of the company was taking over the role of another employee and deliberately undermining her to engineer a redundancy situation in which she could be dismissed without being able to successfully present a claim for unfair dismissal. Perhaps unsurprisingly, the employment tribunal upheld the employee’s claim and found that she had been unfairly dismissed.
The EAT overturned the ET’s decision. Bourne J explained his conclusion as follows:
“the undermining of Mrs Jackson [the claimant] was not relevant to the question of whether a redundancy situation existed … A redundancy situation under section 139(1)(b) either exists or it does not. It is open to an employer to organise its affairs so that its requirement for employees to carry out particular work diminishes. If that occurs, the motive of the employer is irrelevant to the question of whether the redundancy situation exists” (paragraph 20).
Bourne J went on to note that, although there was a redundancy situation, that did not mean the dismissal was fair. The tribunal may still find that the redundancy situation was not actually the reason for the dismissal and that the redundancy “was or could have been a mere pretext for getting rid of an employee whom the employer wished to dismiss” (paragraph 22). He suggested that the employment tribunal in that case may have been distracted by the issue being phrased as whether there was a “genuine” redundancy situation. On the one hand, the situation satisfied the requirements of section 139 of the ERA 1996 but, on the other hand, it was a redundancy situation that appeared to have been contrived by the owner of the claimant’s employer. It may be that the claimant would have been successful if she had argued that redundancy was not the actual reason for her dismissal, but that was not how the issue had been framed and was not included on the list of issues.
Berkeley is particularly useful guidance for two particular reasons. First, Burrell sets out a clear three-stage test for redundancy cases:
- Was the employee dismissed?
- If so, had the requirements of the employer’s business for employees to carry out work of a particular kind ceased or diminished or were they expected to cease or diminish?
- If so, was the dismissal of the employee caused wholly or mainly by the state of affairs identified at stage 2?
Berkeley is a clear reminder that practitioners should adhere closely to these three steps. In cases of alleged sham or fabricated redundancy situations, it is sometimes tempting to elide stages 2 and 3 and Berkeley shows that, even in egregious cases, that elision can be fatal to an employee’s claim.
Second, Berkeley is an important reminder of the importance of carefully drafted lists of issues. Practitioners often use “genuine redundancy situation” as a shorthand for the more lengthy provisions at section 139 and for the three-stage test in Burrell. Berkeley serves as a general warning against the use of such heuristics when preparing lists of issues, and a specific warning against use of the catch-all term “genuine redundancy situation”.
