Employers protection from redundancy claims – Do’s & Dont’s

Peter McInnes

Peter McInnes is the Head of the Employment Law Unit in McDowell Purcell www.mcdowellpurcell.ie

The number of claims brought by disgruntled employees who have been dismissed by reason of redundancy has grown exponentially in the past few years and there in no sign of any drop off in the rate of referrals to the Rights Commissioner Service (RCS) and the Employment Appeals Tribunal (EAT).

With a possible award of up to two years’ remuneration, reinstatement or re-engagement available to employees who have been unfairly dismissed, it is important to have an understanding of the main legal provisions surrounding redundancy issues in order to minimise exposure to legal claims. So, what can employers do to protect themselves from a successful redundancy claim?

Do act reasonably and consult with employees before implementing the redundancies. A clearly defined consultation process should be put in place and redundancies should not be presented to employees as a fait accompli. Also, consider whether the proposed redundancies constitute a “collective redundancy” under the Protection of Employment Act 1977, in which case the employer is obliged is consult with and inform employees in a prescribed matter.

Do use objective selection criteria, for example, last in first out, qualifications/training, flexibility etc. The selection process should be documented and the criteria applied consistently across all departments. An employer must be able to justify why a particular person was selected for redundancy and the decision should be based on objective grounds which are unrelated to the individual concerned, for example, last in first out (LIFO). Employers should tread with caution if using criteria such as attendance records, which may inadvertently discriminate against an employee who has been on sick leave, or disciplinary records, which may be regarded as a double penalty.

Do have a business case for the redundancy process. An employer should be able to produce documented evidence for the reasons for the redundancies, for example, revenue figures, lost contracts, increased use of technology.

Do offer employees alternative roles, if any exist.

In O’ Kelly v XSIL Limited [UD 1086/2007] the Tribunal held that the claimant had been unfairly selected for redundancy and ordered his reinstatement. The Tribunal’s decision was based on a number of issues including: (i) the process used in selecting staff for redundancy was based on a template in relation to qualifications, skills and disciplinary record but neither the template nor documentary evidence in relation to the financial position of the company were produced before the Tribunal; and (ii) there was no meeting with the claimant, no discussion with him about the selection criteria and no discussion about suitable alternative roles. 

Do consider alternatives to redundancy put forward by the employees and be in a position to demonstrate that consideration was given to any such suggestions.

In Sheehan & O’ Brien v Vintners Federation of Ireland [EAT, 2008], the EAT awarded compensation of €43,000 to each claimant on the basis that the employer did not consider the cost cutting proposals put forward by the claimants as an alternative to redundancy.

Do consider offering an ex gratia sum in excess of any statutory redundancy entitlement in exchange for a compromise agreement signed by the employee waiving his/her entitlement to take a claim against the company. This may go against the grain if an employer believes it has done nothing wrong but bringing a claim is a very simple exercise and employers may find themselves expending a considerable amount of time, effort and costs defending a claim they could have compromised for a smaller amount.

Don’t create a “sham” redundancy. Often employers use the recession as an excuse for getting rid of nuisance, or underperforming employees, usingredundancy as a pretext. However, it is critical that this approach is resisted as it is the role, and not the person, that is made redundant and most “sham” redundancies are eventually revealed as such.

Don’t try to make an employee on maternity, adoptive or parental leave redundant.

Don’t discriminate!  Selection for redundancy should not be based, whether directly or indirectly, on discriminatory grounds i.e. gender, age, religion, race, family status, marital status, membership of the travelling community, disability or religion.