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Genuine redundancy or easy way out?

Jackie Denham explores the importance of the context of how a redundancy arises and its implications.

The Employment Appeal Tribunal (EAT) has recently considered whether the manner in which a redundancy situation arises affects whether there has been a genuine redundancy.

The facts of the case

A Managing Director at the employing company was taken on for the purposes of dealing with the day-to-day of running the company. The main intention was to allow the owner of the business to take a more reserved role within the company.

Further down the line, the owner of the business started becoming more involved with the conduct of the business and also constantly undermined the Managing Director, affecting her ability to carry out the tasks within her remit. Shortly thereafter, the owner appointed himself as the CEO and announced that he would be regaining control of the management side of the business.

As a result, the role of Managing Director was no longer required and the Managing Director was informed of the decision to make her redundant on the grounds that the company no longer had a need for employees to carry out the work she had been doing.

Considerations

The case was first heard at the Employment Tribunal (ET) which decided there was no redundancy and no business reorganisation and therefore no fair reason for the dismissal and the employer appealed. The question the EAT had to consider was whether there was a genuine redundancy situation given the circumstances in which the redundancy had arisen.

The EAT held that there was a genuine redundancy despite the fact the former Managing Director felt that she had been mistreated and undermined in the lead up to the redundancy. As the owner had absorbed the roles and responsibilities of the Managing Director into his own position, regardless of the business’ true reasons for making her redundant, this still demonstrated that there was a reduction in the requirements of the business for employees to carry out the particular kind of work that the Managing Director had been doing.  Therefore it was a genuine redundancy situation. The motive of the employer is irrelevant in determining this.

This does not however mean a claim of unfair dismissal will fail.  The employer’s conduct leading up to the redundancy is still relevant in determining whether the redundancy situation was the reason for dismissal (or just a pretext for getting rid of the employee), whether the employer acted reasonably in treating the redundancy situation as sufficient reason for dismissing the employee and whether there was any unfairness in the dismissal process followed.

A Tribunal will always consider the specific facts of a case to determine whether there is a fair reason for dismissal and also if the decision to dismiss and the process followed was fair. It is of the utmost importance that when going through the redundancy process, employers make careful and fully informed decisions. Should you need advice in this regard, our employment team are available to assist with their expertise in this area.