A GUIDE TO REDUNDANCY LAW

Transcription

1 A GUIDE TO REDUNDANCY LAW

2 INDUSTRIAL RELATIONS IN PRACTICE General Editor: Jim Matthewman Industrial Relations in Practice is a new series intended for personnel managers, union negotiators, employees, welfare advisers and lawyers. With an emphasis on current practice in leading British organisations and trade unions, the series takes an overall independent stance, with titles aimed at both sides of industry. The various authors, who have been selected from management, independent research groups and labour organisations, address themselves to topics of immediate and practical concern to the workforce of today and those responsible for its management. Edward Benson *A GUIDE TO REDUNDANCY LAW Gary Bowker *DISCRIMINATION AT WORK Robin E. J. Chater *THE TREATMENT OF SPECIAL CASES IN INDUSTRIAL RELATIONS Alastair Evans and Stephen Palmer *NEGOTIATING SHORTER WORKING HOURS Jim Matthewman! CONTROLLING ABSENTEEISM Susan M. Shortland *MANAGING RELOCATION *published by Macmillan tpublished by Junction Books Series Standing Order If you would like to receive future titles in this series as they are published, you can make use of our standing order facility. To place a standing order please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address and the name of the series. Please state with which title you wish to begin your standing order. (If you live outside the UK we may not have the rights for your area, in which case we will forward your order to the publisher concerned.) Standing Order Services, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hants, RG212XS, England.

3 A GUIDE TO REDUNDANCY LAW Edward Benson M MACMILLAN

4 Edward Benson 19!!5 Softcover reprint of the hardcover I st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright Act 1956 (as amended). Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1985 Published by THE MACMILLAN PRESS L TO Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world British Library Cataloguing in Publication Data Benson, Edward A guide to redundancy law.-(industrial relations in practice) I. Employees, Dismissal of-law and legislation--great Britain I. Title II. Series ' KD3110 ISBN ISBN ( ebook) DOl I /

5 Contents Acknowledgements List of Abbreviations Introduction VI vii ix 1 Who Is Covered by the Legislation? 1 2 Dismissal 23 3 Redundancy 44 4 Offers of Alternative Employment 68 5 Lay-Off and Short-Time 90 6 Misconduct Rights During Notice Period Claiming Redundancy Pay Rebates and Notification Calculation of Redundancy Pay Consulting Trade Unions Transfer of Business Unfair Redundancy 171 Postscript 199 Statute List 204 Case List 206 Index 217 v

6 Acknowledgements I should like to thank Incomes Data Services Ltd for allowing me to make use of their extensive range of source material and for all the encouragement and assistance they have given me. I should also like to thank Sarah Brooks and Carolyn Llewellyn for their valuable contribution in the form of typing services, and my colleague Gary Bowker for his support. E.B. vi

7 List of Abbreviations Organisations ACAS Advisory Conciliation and Arbitration Service MSC Manpower Services Commission Courts and tribunals EAT Employment Appeal Tribunal NIRC National Industrial Relations Court Statutes EA 1980 Employment Act 1980 EA 1982 Employment Act 1982 EPA Employment Protection Act 1975 EP(C)A Employment Protection (Consolidation) Act 1978 TULRA Trade Union and Labour Relations Acts 1974 Miscellaneous LIFO 'last in first out' NIC Notice of Intention to Claim s. Section Sch. Schedule The text explains the law as it stood at 30 April The postscript explains developments in the law that have taken place between that date and 31 January Vll

8 Introduction 'Compensation is provided by the Act* for one, but only one of life's changes of fortune as between employer and employee; that is dismissal on account of redundancy within the meaning of the Act' (said by Sachs L.J. in Hindle v. Percival Boats Ltd- [1969] ITR 86). That is all redundancy provisions do. They do not compensate an employee generally for losing his job; they do not give an employee a 'right to a job' or protect him when he loses it. There is no element of punishing the employer or rewarding the employee. An employee just gets his redundancy pay if he is dismissed, and that dismissal happens to fit the definition of a redundancy dismissal; (dismissal and redundancy are defined in later chapters). It sometimes seemed unfair. One dismissed employee may have happened to get a redundancy payment, whereas another, maybe far more deserving and harshly treated, did not. This may have been unfair, but the intention was not to encourage employers to act fairly when dismissing employees. That was done by a latter Act of Parliament- the Industrial Relations Act Nor was it to ensure a person was provided for if he was out of a job - that function was performed by the unemployment benefit system. So what was the point of the Redundancy Payments Act? For the answer, one has to go back to the economic and industrial conditions of the country at that time. Industry was out of date. Industries that had flourished once were no longer paying their way, while new industries were growing up that were more profitable, but had difficulty in expanding because of lack of staff. Out of date machinery and obsolete methods were being used that were wasteful of manpower. In short, industry in this country had become inefficient. So a change was needed. The trouble was, the required changes would inevitably lead to hardship. Shutting down or modernising the out of date industries would lead to loss of jobs. So would introducing * The 'Act' referred to is the Redundancy Payment Act 1965, which has been largely repealed; its main provisions are still in force, but now contained in the Employment Protection (Consolidation) Act IX

9 X A Guide to Redundancy Law new, more efficient methods, or new technology. Admittedly some new jobs would be bound to arise. For example, the advent of new technology would create both the jobs of producing and operating it. However, some mechanism was required for employees to be prepared to give up their old jobs without the guarantee of new ones. Obviously, there would be resistance - resistance from employees who feared long periods of unemployment; for whom their current jobs had become a way of life; who were afraid of having to adapt to new, different jobs, which would possibly involve retraining, or starting again lower down the ladder - and opposition from the trade unions, which reflected the fears of their members. The Redundancy Payments Act 1965 was introduced simply to remove that fear, so that trade unions would not oppose changes that would result in job losses; so that employees, particularly those who had been in the same job for a long time, would not be frightened of industrial change; so that employers would not be put off industrial change through fear of industrial unrest. Although industry shed many jobs and unemployment began to rise, there was still a fear - perhaps a greater fear than previously - of redundancy, as the social effects of long-term unemployment were becoming very apparent. But the blow was still cushioned. The result was achieved. Industrial relations took a very different turn when the Industrial Relations Act 1971 * was introduced. That Act among other things provided compensation to employees for loss of their jobs, unless employers could show the dismissal was fair. To some extent, an element of fault was brought in - i.e. if the employer had a good reason for dismissal (and redundancy was considered a good reason) and the employer had behaved reasonably, then no compensation would be payable. Fault was not, however, the crucial element- an employee could be dismissed through no fault of his own and not be entitled to compensation. For example, he could be fairly dismissed because of long-term illness or because of his conduct; but even then what mattered was the employer's reasonable and genuine belief in that misconduct - not the employee's actual guilt. Consequently it could not truly be said that the legislation provided employees with a 'right to the job'. Industrial relations thus became litigious. Employees had a That Act was repealed, but the unfair dismissal provisions survived. in a considerably amended form, in the Employment Protection (Consolidation) Act 1978, alongside the redundancy provisions.

10 Introduction xi relatively cheap method of enforcing their right not to be unfairly dismissed, and so employers and their legal advisers soon learnt the ways to ensure dismissals were fair. History has shown the employers were not actually put off dismissing employees - they simply went about dismissing employees in a 'fair way'. It might have been some consolation to an employee that his employers had behaved fairly, but he still lost his job. Redundancy then became part of an employer's tactics. If possible, employers would try to fit the circumstances of the dismissal into the redundancy definition. It was considerably cheaper to dismiss fairly for redundancy than to dismiss unfairly. First, unfair dismissal compensation is often considerably more than redundancy pay, and secondly, employers could obtain a rebate from the Redundancy Fund for any redundancy payments made. A dismissal for redundancy could still be unfair if the employer was unreasonable in dismissing the employee - for example, the employer might apply an unfair system for the selection of employees to be made redundant, or he might fail to make proper attempts to find employees suitable alternative jobs. Employers began to learn the rules about how to go about making redundancies without incurring liability for unfair dismissal. Until recently, tribunals have not helped employers in this respect. They shied away from laying down guidelines for employers, and whenever they did so, they were roundly criticised by the Court of Appeal. More recently, however, the EAT has provided such guidelines. It remains to be seen whether the Court of Appeal will approve. One result was the greater involvement of trade unions in decisions about how the redundancies should be made. It meant employees or their trade union representatives were consulted before redundancies were made. Of course, employers were not obliged to take note of anything that arose out of that consultation - but the important thing was, consultation did take place. It meant employees might be offered other jobs within the employer's organisation as an alternative to redundancy. This led to better industrial relations, fewer strikes over threatened redundancies and a greater awareness by employers of the value of a job to their employees. The trade unions were, of course, never happy about proposed redundancies, but their greater involvement removed much of the resentment associated with redundancy that had existed in the past. This greater involvement was given a further boost by the Employment Protection Act 1975, which imposed an obligation on

11 xii A Guide to Redundancy Law employers to consult with trade unions at the 'earliest opportunity' about proposed redundancies. Minimum periods of consultation were laid down in the case of large-scale redundancies. Information had to be disclosed in writing to a union, and employers had at least to consider and reply to any representations made by the union. This was all very well for large companies with legal departments or access to lawyers. But for smaller employers, things became very difficult. It took a long time for them to acquaint themselves with the new legislation, and their obligations under it. Some of these obligations, particularly the obligation to consult unions, were really not appropriate to the small-scale employer. He would often only find out about them when faced with a claim in an industrial tribunal. Employees too had their difficulties. The legislation, particularly the redundancy provisions, is riddled with technicalities. Any one of these technicalities could deprive an employee of his redundancy pay. The definition of redundancy itself is difficult enough, even for lawyers, to understand. For employees unacquainted with the legal processes, the whole area is a minefield. For example, in certain circumstances, employees are entitled to redundancy pay if they have been laid off for long periods. One tribunal chairman commenting on these provisions, with a rather optimistic view of the expertise of the experts, said: 'The legislative provisions relating to entitlement to redundancy pay in consequence of extended lay-off are so detailed and technical that it is impossible to conceive how any working man can be expected to understand them, still less avail himself of them, without expert assistance' (Nunn v. Alec Berman & Sonsunreported COlT 119/106). However, the less rigid unfair dismissal provisions can sometimes provide dismissed employees with compensation. To understand why these technicalities exist, one has again to go back to the policy of the 1965 Act. Its purpose had more to do with social engineering than with protecting employees. The policy behind these technicalities is explained at appropriate stages in the book. For example, employees are encouraged to consider seriously any jobs offered by their employer as alternatives to redundancy,* and not to take industrial action when redundancies are threatened. t But most employees did not know of these technicalities. The An employee may lose his right to redundancy pay if he unreasonably refuses his employer's offer of a suitable alternative employment. t 'Serious misconduct' may disentitle an employee from all or part of his redundancy pay.

12 Introduction XIII effect was not so much to encourage employees to behave in the way intended by the Act, but more to deprive an employee of his redundancy pay if he was unfortunate enough to stumble over one of these pitfalls. So the redundancy payments scheme is perplexing. The provisions often seem pointless and over-technical, until one remembers the intention behind the scheme. As this book will show, redundancy is not an easy area of law to understand, largely because there is so much there to be understood. I have tried to make it as simple as possible, but the unfortunate fact remains - redundancy law is complicated.