Mills & Reeve: HR Law Live

Do employers need to consider bumping in redundancy consultations?

The Employment Appeal Tribunal has confirmed that there is no general rule that an employer is only required to consider bumping if it is raised by the employee. Whether or not bumping should be considered during redundancy consultations will depend on the particular facts of each case, in the context of the employment tribunal’s assessment of whether the employer’s decision to dismiss was reasonable – and hence fair.

Bumping refers to the process of transferring an employee whose role is at risk of redundancy into the role of another employee, who is then made redundant instead. The other employee is said to have been “bumped” out of their former position.

In this case, the claimant was engaged as a sales director and managed a team of account managers. Over time, it became clear that the division in which the claimant was employed was failing to grow as expected. The claimant’s role was unique in that he was the only sales director employed in the division, and as such he was informed that he was at risk of redundancy. During the consultation period, the employer relied on an email sent by the claimant during an earlier restructuring of the division which had stated that he did not wish to be made an account manager. It therefore did not consider transferring the claimant into a subordinate role as an alternative to redundancy.

The employment tribunal had concluded that, following earlier case law, the onus was on the claimant to suggest that he would consider taking an a more junior role to avoid redundancy. In absence of this, the ET ruled that the employer had not acted unreasonably in failing to consider bumping as part of the consultation process.

The EAT has now ruled that the ET was wrong to interpret the previous case law in this way. It did not set out a rigid rule in this respect. In addition, the ET had failed to recognise that the claimant had indeed raised the possibility of bumping. The EAT therefore remitted the case to the ET to reconsider its decision that the dismissal had been fair.

This latest EAT decision confirms that there is no firm rule on whether it is reasonable to consider bumping as part of a redundancy consultation process. Whether employers should consider bumping will depend on the individual circumstances of the redundancy. It may be more appropriate to consider this possibility where there is a single or small group of employees at risk of redundancy who have valuable transferable skills. It will be less likely to be appropriate to consider bumping where there are collective redundancies taking place, or where the employee at risk has a highly specialised role. In any case, employers must be aware that if an employee raises any possibility of bumping during a redundancy consultation process, then the employer should always take steps to consider whether this is a viable option.

Rumer Burnett, Trainee Solicitor

ECJ pushes back on starting point for collective redundancies consultation

In two Polish references about changing terms and conditions for hospital staff, the European Court of Justice has revisited the question of when consultation about collective redundancies should start.

For UK readers there is little surprising in its ruling that the Collective Redundancies Directive was engaged when two hospital employers in different parts of Poland sought to impose unfavourable changes to staff terms and conditions in order to save money. In one case it was a question of a temporary 15% pay cut and in the other the removal of generous long service payments.

What is more interesting is what the ECJ says about when the collective consultation required by the Directive should have started. That involved interpreting the somewhat vague wording of Article 2 which requires it to begin “where an employer is contemplating collective redundancies”. It is clear from earlier decisions that this must be prior to the decision to dismiss. But how much earlier?

In both these cases the employers sent out notices of amendment, which under Polish law had the effect of terminating the contract of employment if the employees did not accept the amendment. If they failed to object to the amendment by the mid-point of the notice period they were deemed to have accepted it. In one case, but not the other, sending the letters of amendment had been preceded by a period of individual consultation, after which about 20% of the employees accepted the change.

The ECJ has ruled that it should have commenced consultation before sending out the letters of amendment, since “it should reasonably have expected that some employees would not accept the change to their conditions of employment”.

As often with decisions of the ECJ it is not easy to apply this decision to the UK context, since the provisions in the Polish Labour Code about amending contracts of employment have no equivalent in English law. However the broad principle that emerges is that deciding on an action which is likely to lead to a number of dismissals in the future in the ECJ’s view amounts to “contemplating collective redundancies”, even if the precise numbers of actual job losses cannot be ascertained at that point.

In practice in the UK if negotiations about changing terms and conditions fail, imposing them is normally done by a letter of dismissal combined with an offer of re-engagement, which would clearly engage the obligation to consult. However there is more than a hint in these latest decisions that consultation should start at an earlier point, once the idea about imposing compulsory changes to terms and conditions has been formulated.

 

Could there be a gap in the UK's legal protection for pregnant women?

Pregnant women should enjoy additional protection against being made redundant, even in circumstances where it would be lawful to dismiss other employees, according to a recent advocate general’s opinion, given in a Spanish collective redundancies reference,

The question arose because the High Court in Catalonia was not sure whether a pregnant worker had to be given additional protection under EU law in a redundancy situation, or whether her rights in that situation were no greater than those enjoyed by the general workforce.

Advocate general Sharpston is of the opinion that it is not sufficient for an employer to comply with the requirements of the Collective Redundancies Directive when dismissing a pregnant employee on redundancy grounds. As well as establishing that the dismissal is “for one or more reasons not related to the individual employee concerned” and following the Directive’s information and consultation requirements, the employer must if at all possible redeploy a pregnant worker into suitable alternative employment.

Under UK law a women on maternity leave is given a similar level of protection. There is a requirement in the Maternity and Parental Leave Regulations which in effect requires an employer to give priority to a woman already on maternity leave when redeploying staff in a redundancy situation. There is however no equivalent requirement if a pregnant women is made redundant before going on maternity leave.

The reason for this gap in the legislation is not clear. Possibly it is because protecting the rights of women to return to work after maternity leave was seen as a particular priority, given they are underpinned by a specific requirement in the Equal Treatment Directive. However it is possible that the more general protection conferred by the Pregnant Workers Directive has been overlooked until now. This includes a “prohibition against dismissal” from the start or the pregnancy up to the end of the statutory maternity leave period “save in exceptional circumstances”.

The advocate general has said that a standard redundancy situation does not count as an “exceptional circumstance” for these purposes. If this opinion is adopted by the European Court of Justice it will mean that, on the face of it, our domestic legislation on redundancy has some gaps as far as pregnant workers are concerned, if it is to comply fully with EU law.

2016 amendments to Civil Service Compensation Scheme declared void

The High Court has ruled that amendments made to the Civil Service Compensation Scheme last year were unlawful and accordingly of no legal effect. These changes were introduced to reduce the value of voluntary exit, voluntary redundancy, compulsory redundancy and inefficiency payments. This ruling affects not only central government employees, but significant numbers of third sector and quasi-public sector workers whose employers participate in the Civil Service pension arrangements.

The Government introduced the changes in November 2016 following consultation with various unions and the agreement of eight unions. The reforms were not however agreed with Public and Commercial Services Union or the Prison Officers’ Association. The PCS brought judicial review proceedings to challenge the validity of the changes.

PCS successfully argued that the Government failed in its duty to consult with a view to reaching agreement (an obligation under the Superannuation Act 1972) in that it was excluded from further discussions about the amendments to the scheme that followed an initial consultation. Whilst PCS was included in the initial discussions the Court found that as the Government had held further discussions on the scheme that led to further changes without PCS being present, the Government had not fully met its duty to consult with a view to reaching agreement.

The Government has stated it will be appealing the judicial review decision, including on the basis that further discussion with PCS would not have made a difference to the scheme amendments. The Government has stated it will ask the Court to stay the current JR decision pending the appeal so that the 2016 terms can be used for now.

However pending further clarification it is likely that all voluntary exit, voluntary redundancy, compulsory redundancy and inefficiency exits will need to be calculated on the 2010 terms. The position with regard to payments already made under the 2016 terms is more complicated, as not all types of payment will necessarily be treated the same, through some may need to be recalculated.

Employers affected by this decision should await further guidance from the Cabinet Office. If decisions cannot be deferred, it would be prudent to take legal advice in relation to any redundancy or restructuring arrangements currently being progressed.

Patrick Gass, Principal Associate

Lack of sensitivity in handling redundancies can result in unfair dismissal

Being insensitive as an employer is not necessarily the same as being unreasonable, but it certainly doesn’t help when defending an unfair dismissal case.

Thomas v BNP Paribas is a decision of the Employment Appeal Tribunal about the dismissal of a senior manager, Mr Peter Thomas, on redundancy grounds. After over 40 years’ service, at the age of 59, he found himself as the only person in the selection pool for redundancy. That followed from a strategic review of his employer’s property management business, which had established that it was top heavy in management terms.

The main issue on appeal concerned the way consultation about alternative employment had been handled. The tribunal concluded that it had been conducted in an “insensitive and perfunctory manner” but that the dismissal had nevertheless been fair.

The employment tribunal’s findings addressed a particularly crass error in the initial consultation letter, which addressed the claimant as “Paul” instead of “Peter”. The EAT was more troubled by the employer’s decision to put him on garden leave at the start of the consultation, which had shocked and upset Mr Thomas.

However the EAT thought that the main flaw in the tribunal’s reasoning was its failure to explain why it had gone on to conclude that the dismissal had been fair, despite its strongly worded criticism of the way the consultation had been handled. It therefore remitted  the case to a new tribunal to look at this issue afresh.

It is not possible to predict the final outcome of this litigation. If the employer does lose, it will probably be because what in substance was a relatively reasonable consultation was marred by careless errors that arguably a reasonable employer would not have made. Certainly getting an employee’s Christian name wrong was not a good start, but it is more debatable whether putting him on garden leave was necessarily “insensitive and perfunctory". There may have been legitimate business reasons for acting in this way, though there is no doubt much will depend on exactly how this step was implemented.

Public sector exit payments: where are we now?

Earlier this week the Government published its response to its February 2016 consultation about reducing exit payments in the public sector.  But how will these changes fit in with its earlier and more targeted plans for imposing an overall cap on these payments? And what about plans to claw back payments from more highly paid workers who get another public sector job within 12 months?

Caps and clawbacks

There has been no concrete news since the end of last year, when a final draft of the claw-back regulations and an initial draft of the cap regulations were published. That means that there is nothing new to add to the briefing we published in January which summarises these proposals in some detail.

Originally the Government was planning to introduce both sets of regulations in April, but the timetable has slipped. It appears that October this year was the new target. It now seems likely that this will be missed too.  It is possible that we may see the claw-back regulations being introduced by the end of the year, though the Government may not be ready to impose the cap until next year.

Wider reforms

This week’s response to consultation makes it clear that the Government is seeking more wide-reaching changes to the way public sector exit payments are calculated, bearing in mind that the new cap will not have an impact on the “large majority” of exits.

The Government wishes to align the terms on offer in the public sector more closely with comparable terms available in the private sector, in the hope of achieving annual savings in the region of £250 million. Among other things, it is stipulating that there should be a maximum tariff of three weeks’ pay per year of service and an overall ceiling of 15 months’ pay when calculating redundancy payments.  It is also seeking to limit or end early access to a pension as part of an exit package.

The Government has now set a framework which will allow government departments to produce their proposals for each workforce. They have been given three months to put forward proposals and are then expected to begin the normal process of discussions and negotiations with Trade Unions and other workforce representatives.  Departments have been given nine months from now to conclude the negotiations and implement any necessary changes.

Jog Hundle, Partner

Employment law review of the year 2015/2016

To mark the beginning of another year, we have prepared a briefing looking at the key developments of 2015 which will continue to be significant as we move into 2016.

The introduction of Shared Parental Leave, the launch of the National Living Wage and the publication of the Trade Union Bill were arguably the stand-out developments of last year. But there have also been important developments in other areas including collective redundancies, disability discrimination and unfair dismissal.

Developments to look out for early in 2016 include a decision from the Employment Appeal Tribunal about commission and holiday pay and the Government’s response to consultation about the scope of compulsory gender pay reporting.

Collective redundancies: still waiting for answers

The Supreme Court has now pronounced on the long-running dispute over redundancies following the closure of an US army base in Hampshire, but employers are not a lot wiser as a result. That’s because the Supreme Court was not asked to rule on whether there had been a breach of the collective redundancies legislation, but had to decide whether this legislation applied to the US government at all.

For complex procedural reasons the main issue in the dispute – whether the US Government had an obligation to consult at an earlier stage – has still not been decided. Instead the past five years have been taken up with a complex series of procedural steps. The latest was an appeal to the Supreme Court on the preliminary issue of whether decisions of a foreign government could, even in theory, fall within the scope of our domestic legislation.

That question has now been resolved in favour of the claimant Mrs Nolan and her colleagues, clearing the way for the Court of Appeal to make a ruling on the merits of the case. Are there any clues in the Supreme Court’s judgment about how the Court of Appeal will approach this decision?

For many years businesses and their advisers have been pinning their hopes on this litigation answering one key question about collective consultation: when should it start? It has been a long wait, and some are beginning to wonder whether we have been asking the wrong question all along. Our legislation talks about the consultation starting “in good time” (subject to a minimum consultation period which is now 45 days if 100 or more employees are involved). Much judicial ink has been spilt seeking to define the point in the process where consultation should begin in the light of this seemingly vague exhortation to best practice, so far without a wholly satisfactory solution.

Now the Supreme Court has hinted that it may not be necessary to answer this question when the case returns to the Court of Appeal, presumably because the key issue is likely to concern the quality of the consultation rather than exactly when it should have started. Certainly it is possible to become too fixated about the exact timings and to lose sight of the overall purpose of the legislation, which is to enable meaningful consultation to take place about avoiding job losses.

Three ways to get tough on employment exit payments

Termination payments to departing employees are unpopular with the government and the public for a number of reasons. First, when they happen in the public sector they cost a lot of taxpayers’ money – more than £6 billion in the three year period between 2011 and 2014 according to government figures. Secondly, when made to senior employees, they can be seen as “rewards for failure”. Thirdly, to add insult to injury, the existing tax regime means that there is a considerable amount of tax and national insurance foregone on the value of these payments. There are currently three government initiatives to address these concerns.

On the tax front the Office of Tax Simplification concluded an investigation in July 2014 which recommended changing the current rule that allows the first £30,000 of non-contractual termination payments to be free of tax and national insurance. The government has now published a consultation which explores how the current tax regime could be replaced with a more limited exemption that will apply only when the employee is being made redundant. The idea is for the value of the exemption to increase depending on length of service.

Turning to the measures directed specifically at the public sector there are currently two main initiatives. The first is the imposition of a cap of £95,000 on the total value of each exit payment in the public sector, even it seems, if the payments are contractual in nature. Further details of how this might work are set out in this document. The cap will not extend to quasi-public bodies like the BBC, though they will be expected to introduce a “commensurate cap”.

In addition, we are waiting for final regulations to implement provisions in the Small Business, Enterprise and Employment Act passed earlier this year which will require public sector payments over £100,000 to be repaid if the recipient gets another job in the public sector within a year. Repayment will be on a sliding scale depending on the length of the gap between jobs. A response to consultation (including draft regulations) was published last year. It goes into considerable detail about how the new arrangements would work. Clearly if the proposed cap is effective, it is questionable whether these additional measures will be needed, at least without some modification.

Employers will be watching these developments with interest, since they are likely to have a significant impact on how termination packages are put together, especially in the public sector.

Collective consultation obligations apply to each establishment separately

In the Woolworths litigation the European Court of Justice has now ruled that there is no need for employers operating a number of different establishments to aggregate redundancy dismissals across their entire operation to work out whether the threshold for collective consultation has been reached. This decision in effect overturns the decision of the Employment Appeal Tribunal two years ago. The EAT held that when closing down its national chain of stores, Woolworths should have collectively consulted with employees at its smaller stores with fewer than 20 staff.

The legal argument boils down to the interpretation of the relevant provisions of the UK’s collective redundancy legislation, which impose an obligation to consult on an employer where it is proposing to dismiss as redundant “20 or more employees at one establishment within a period of 90 days or less”. The ECJ has stated that for these purposes “establishment” should be interpreted in accordance with its previous case law, which has defined it as referring to the “unit to which the workers made redundant are assigned to carry out their duties”.

In effect this is likely to mean that the employment tribunal was right to decide that each individual Woolworths store was an establishment for these purposes, and the EAT was wrong to overturn this decision. However that is a matter for the Court of Appeal when it reconvenes to consider the case.

In the meantime the key message for employers is that the law has reverted to how it was before the EAT upset the apple cart two years ago. That means that employers planning redundancies will need to work whether the workers affected are assigned to a number of separate establishments, or all work at a single establishment. That has never been an easy question to determine, as “establishment” could mean the place where the employees work, or the business unit to which they are assigned.