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Redundancy and your Rights in a Redundancy Situation

Where an employee is dismissed on grounds of redundancy, the dismissal may still be unfair if there has not been adequate consultation or where the employee has been unfairly selected for redundancy.

Do you know your rights on Redundancy?

  • Is your job or role ceasing to exist?
  • Is there a downturn in your employer’s business?
  • Do you have two years’ service?
  • Are others being let go at the same time as you?
  • Have you been placed on lay-off?
  • Have you been asked to sign an RP50 form?
  • Have you been asked to sign a waiver or compromise agreement?

What is a redundancy?

Redundancy is a dismissal or termination of a contract of employment by reason of the redundancy or elimination of that particular role and is capable of challenge if it is unfair.

A redundancy arises where an employee’s role ceases to exist, for example in the event that an employer needs to reduce its total number of employees or to close down a department, division or the business completely.

In the case of a reduction of the number of employees, redundancies normally happen either because:

  1. the work of particular employees is no longer required
  2. the work of particular employees can be spread around other employees without taking on additional employees

Other examples include circumstances where the job changes and the job requires particular skills and/or qualifications which the employee does not have, or the business moves to a new location.

If the reason for the redundancy does not fall within the above categories then it is deemed not to be a genuine redundancy and will amount to a dismissal. This means that you, the employee, can take a claim under the Unfair Dismissals Act 1977 – 2007.

Employee entitlements on redundancy

For employees to be entitled to a redundancy lump sum they need to meet the following requirements:

  1. employees must have at least two years continuous service (104 weeks)
  2. employees must be in employment which is insurable under the social welfare acts
  3. employees must be between the age of 16 and 66 years old
  4. you must have been made redundant as a result of a genuine redundancy situation

Under this act an eligible employee is entitled to two weeks statutory redundancy payment for every two years of service, plus a bonus week. All statutory redundancy payments are tax-free.

Redundancy and unfair selection for redundancy

It is important in considering a redundancy situation and in particular where one or a number of employees is to be selected for redundancy out of a larger group of employees all engaged for the same purpose that a thorough and comprehensive plan and procedure is followed.

There are many practical issues involved such as:

  • the appropriate notice period
  • the length of service
  • contractual redundancy payments vs. Statutory payments
  • what written policy or guidelines exist
  • whether there is a well recognised custom or practice within the company whereby redundancy packages are automatically paid as additional ex-gratia payments to the statutory redundancy.

As with all unfair dismissal cases the onus rests on the employer to prove that the dismissal is not unfair.

What is unfair selection for redundancy?

Where a genuine redundancy exists and an employee is dismissed wholly or mainly for redundancy, the dismissal may still be unfair in circumstances where an individual has been unfairly selected for redundancy. Consideration must also be given to the manner in which the redundancy was affected and to whether the employer has acted reasonably in the circumstances.

When does a genuine redundancy situation exist?

It is for the employer to prove that a redundancy situation exists that justified the dismissal at the date of the redundancy or that it was likely to arise in the immediate future. A genuine redundancy situation exists where dismissal is wholly or mainly attributable to one of the factors set out in section 7 (2) of the Redundancy Payments Act 1967 (as amended by the redundancy payment act 1971) (“the act”).

In a challenge to a redundancy selection in the Employment Appeals Tribunal “EAT”, the tribunal will consider whether a genuine redundancy existed in the first instance and for example such a redundancy may be considered a genuine reason for redundancy where it accords with section 7 (2)(c) of the act – “work to be done by other employees or otherwise” or equally reliance may be placed on section 7(2)(e) – “work to be done by an employee who is also capable of doing other work”.

However, whether this is in fact the case (that such a situation did or did not pertain at the time to an employee who was made redundant or was likely to arise in the immediate future) will be a matter for the company to prove to the satisfaction of the EAT should proceedings for unfair dismissal be initiated.

Typically in a redundancy situation a company will set about justifying this by providing the relevant accounts and balance sheets that show the impact that the economic slowdown is having on their business that left them with no option other than to seek to make a role or roles redundant.

Therefore financial evidence together with a record of the meetings and discussions that led to the decision to make a role(s) redundant are typically relied on.

It is always important to know if such evidence exists. For example an employee will often cite that the company is in the process of actively recruiting more staff and that what appears to be occurring is more in the nature of a restructuring of the workforce. Thus any specific verifiable information in relation to the filling of these positions would be helpful.

It is also helpful to verify as to whether positions had been advertised. Often at the outset of a case we do not have the necessary information to fully assess whether a genuine redundancy situation did in fact exist. However the onus would rest on the company to prove to the satisfaction of the EAT that it in fact did.

When is an employee unfairly selected for redundancy?

It is important to ascertain if the company had any redundancy policy either that the employee was aware of or that was communicated to him. Such policy may be express or implied by custom and practice.

For example some companies follow the policy of “last in, first out”. In the absence of any stated policy the onus is on the company to apply objective criteria in selecting a person for redundancy.

A crucial aspect of employment law is that the redundancy applies to the role and not the person. It is important therefore to understand the nature and structure of the organisation, the department within which an employee worked and the roles that each employee undertook in the department.

Like discrimination, unfair selection relates to an employee’s treatment in relation to other employees and it cannot arise in isolation. There is an obligation on the company to consider the full range of persons in a specific role and apply criteria that were objective in selecting the individual as the person to be made redundant. Thus if an individual is the only person doing a specific role, unfair selection may not arise.

It is important to remember that redundancy must be the only or main reason for dismissal. If, as a company indicates that the reason for a dismissal was prompted by capacity/capability to perform certain duties, etc, this would be detrimental to their case in that it would show that the real reason was in fact personal to the employee. This can however be avoided by a company where the capability of employees is specifically identified as a criteria in the selection process.

It is important therefore at this stage to establish and confirm whether an employee was ever informed of any dissatisfaction with work performance, capabilities or competence. You might also confirm that there are no other issues of contention or complaint made against the employee during the course of the employment and that there were no allegations or complaints made against the employer or any work colleagues during the course of the employment.

In a redundancy situation, did the employer act reasonably and fairly?

There is no statutory requirement for an employer to have consulted with an individual employee prior to that employee being made redundant. However it is now viewed as good industrial relations practice to do so and failure to do so may be utilized to show the unreasonableness of the employer in the circumstances.

Often a company will arrange meetings with employees and give advance warning of the nature of the meeting or the fact that redundancy was being considered. Only when having consulted with the employees effected and sought their views and suggestions in relation to possible redundancy should a company seek to select individuals for dismissal and confirm that a redundancy situation exists. At this stage notice can be given and is normally set out in writing confirming the selection, the procedure which was followed, the criteria used and setting out the terms of the redundancy.

At the consultation stage, there is a requirement to consider alternative work within the company. The employee if at all possible should be given the opportunity to consider alternative work within the company or put forward any proposals in relation to alternative work or alternative or reduced conditions of employment within the company.

It is important to know whether the company gave any consideration to such matters and, if they did give such consideration, whether such matters are documented. There is a view that if no consideration was given to alternative work within the company that this would be capable of being viewed as unreasonable by the employer.

What are the costs of an application to the EAT?

Unlike many other forums for legal redress the EAT does not have the power to award costs. Therefore each party must bear their own costs. It therefore is advisable to always consider the potential exposure to costs at this stage and the fact that whatever the outcome of the case, although the applicant will not be liable for the employer’s legal costs before the EAT.

Of course this also means that even if an applicant is successful he must bear his own costs. It is often easier to quantify the cost exposure before the EAT than in other legal forums which may be helpful for an employee in considering his options.

If counsel is required to be instructed in relation to the EAT hearing the likely fee could be in the region of €1,500 (to include preparation for hearing, advice on proofs and one consultation and exclusive of vat at 21.5 %). Any additional work would attract extra fees.

An employee’s entitlement to a reference

Often a reference is an important issue which must be considered before seeking legal redress. The employee will have to decide on how important a reference may be given the nature of the industry in which he works. There is no obligation on the company to supply a reference and typically, when legal proceedings have issued, references are often reduced to mere factual statements of the dates of service and the roles and responsibilities carried out.

If a matter is to be ultimately settled a more fulsome reference may be negotiated. It is helpful for a reference to state that his position terminated by reason of redundancy and therefore avoid suspicion of misconduct or incompetence. If the matter goes to hearing the opportunity to acquire a meaningful reference is generally lost.

An employee’s entitlement to a p45

Every employee dismissed or ceasing employment for whatever reason is legally entitled to a p45. If not provided this should be formally requested and stating that in the event that the company fail to furnish his p45 by return contact shall be made with the revenue commissioners to engage their assistance in procuring same.

What compensation or redress is an employee entitled to?

Compensation is the most common remedy awarded by the EAT. If successful in an unfair dismissal action an employee may be awarded a maximum of up to two years salary. However such a high award has only been made on a handful of occasions and should not be expected.

A more realistic result, if the company cannot prove to the satisfaction of the EAT that the dismissal was not unfair, is a sum in the region of 40%-50% of the two years. Therefore one year’s salary would be seen as a very good result in most circumstances. The average award of the EAT currently is €11,000.

However, there are two things that must be considered in trying to quantify any amount that may be awarded:

  1. award is only made for actual loss from the date of dismissal to the hearing of the action and for any projected loss into the future. If an employee was to take up another job or to set up business on his own account the actual loss would be the loss of salary up to the start of the new job and the differential, if any, of the rate of remuneration between the old job and the new job. There is an obligation on any claimant to mitigate his loss and it is useful for an applicant to be able to demonstrate the manner in which he attempted to do so and this should be recorded and documented by keeping the details of all applications made etc.
  2. traditionally the EAT’s awards are lower in relation to claimants who are younger and have a longer working career ahead of them than older claimants. Regard may also be given to the length of time an applicant has worked with a company.