Jo Seery considers when there is a genuine redundancy under the Employment Rights Act

The law cannot challenge an employer’s decision to make redundancies; it can only decide whether there has been a genuine redundancy. This is set out in section 139 of the Employment Rights Act (ERA).

Who can make a claim?

Only employees (anyone with a contract of employment) with two years’ continuous service can claim that they are entitled to a redundancy payment if they are dismissed by reason of redundancy. Workers such as subcontractors or agency workers cannot, therefore, claim these rights.

When is there a genuine redundancy?

Section 139 states there is a genuine redundancy situation when: 

  • an employer closes their business or part of it
  • an employer closes the location at which the employee works
  • the employer’s need for employees to perform the work has diminished.

This definition allows a group of companies to select employees for redundancy from any part of the group, whether or not there is a redundancy situation in each individual company. 


If the redundancy situation does not fall within one of these categories, but the employer tries to dismiss the employee on the ground of redundancy, they may be able to claim that the reason is not genuine and that they have been unfairly dismissed. 

When is there a business closure?

A business closure occurs when an employer ceases or intends to cease carrying on their business. It is the closure of the business that is important so, if they close down and then reopen a completely different business, that would also count as a genuine redundancy.

The issue for tribunals to decide is whether the new business is sufficiently different to the old one, although that is not always easy to determine. In Lewis -v- A Jones & Sons plc. the appeal tribunal held that the closure of a family shoe shop, which reopened as a high-end fashion shoe shop, amounted to a closure of the old business because the new business targeted a different clientele and so was completely different.

However, in Whitbread plc t/a Whitbread Berni Inns -v- Flattery and ors, the appeal tribunal said that changing the business from a Berni Inn to a brasserie four weeks later was not a closure of the old business.

A redundancy situation can also arise when the closure of the business is temporary. However, this will only usually be the case if it closes down for a significant period of time. In Gemmell -v- Darngavil Brickworks Ltd, the tribunal held there was a redundancy situation when the business closed for 13 weeks for machinery repairs. A change in the way the business is run will not, however, amount to a closure for redundancy purposes.

When an employer transfers their business, including the employees, under the Transfer of Undertakings (Protection of Employment) Regulations 2006, the employees are not generally treated as having been dismissed for redundancy purposes. 

When is there a workplace closure?

A workplace closure occurs when a department, office or factory, where the employee is employed to work, closes. That applies even if the employer closes the workplace down and moves the work to a different location.

Similarly, when an employee is employed to work at one workplace and is temporarily relocated to another, they will still be treated as being in a redundancy situation if their original workplace closes.

Whether an employee is redundant because of a workplace closure will depend on where the employee is employed to work. Usually, this will be obvious but, if the employee works in different locations or has a mobility clause in their contract of employment, it may not be straightforward.

In determining the identity of the employee’s workplace, tribunals consider the factual circumstances, such as where the employee actually works, whether that is fixed or if the employee works elsewhere and any contractual terms that define their workplace. 

What about mobile employees?

For mobile employees, such as drivers, the workplace is usually the depot where they are based or the office they report to. In Exol Lubricants Limited -v- Birch and ors, two delivery drivers had a contract that stated that their workplace was a depot in Wednesbury in the Midlands even though they lived in Manchester.

Although they were required to drive to the Wednesbury depot every day, their employer agreed to let them park their HGVs overnight in Stockport, near where they lived. When the employer terminated that arrangement. It argued that the drivers were dismissed for redundancy on the basis that Stockport was their place of work.

The EAT applied the factual test above and held that they were not redundant. It took into account the fact that they travelled to Wednesbury every day and their contracts stated that was their base. In doing so, the EAT said that it was important to take into account the terms of their contracts. 

What is the effect of a mobility clause?

A mobility clause allows employers to change the workplace of their employees. In High Table -v- Horst, which involved an employee who had always worked at one particular workplace, the court held that the employer could not rely solely on the mobility clause to argue that they were now employed at a different workplace in order to avoid making a redundancy payment.

However, this does not mean that an employer cannot rely on a mobility clause to avoid a redundancy situation. In Home Office -v- Evans & anor the court held that the employer was entitled to invoke the mobility clause in the contract rather than dismiss the employees as redundant. In that case the employer closed the immigration facility at Waterloo International and sought to relocate the employees to Heathrow.

There are limits, however, to this approach. Once the employer has announced redundancies, and proceeds down that route, for example by consulting with a recognised trade union, they cannot rely on a mobility clause at a later stage to argue that the employees were not redundant after all.

When does work of a particular kind diminish?

The law says that this applies when:

  • the need to do work of a particular kind has diminished; or
  • the actual workload has not decreased but fewer employees are needed to do it, for example because of the introduction of new technology or because of a reorganisation.


There has been some debate in the past as to whether the “diminishing need” should be assessed by reference to the work the employees actually did, or by reference to the work that they could be required to do under their contracts.

This was resolved in Murray and anor -v- Foyle Meats Ltd, in which the House of Lords (now the Supreme Court) ruled that the test was whether the dismissal was wholly or mainly “attributable” to one of the definitions of a genuine redundancy. There was no requirement to consider what a particular employee could or could not be required to do under their contract.

In this case, the men were employed in work of a particular kind in the slaughter hall; their principal place of work was the slaughter hall; and their dismissal was as a result of a reduction in work in the slaughter hall even though they could be required to work elsewhere in the factory.

This means that a redundancy situation can arise when there is a reorganisation that leads to a substantial change in the kind of work the employer requires to be done even when the overall number of employees remains the same.

In Murphy -v- Epsom College, the Court of Appeal held that each case of re-organisation has to be decided on its particular facts. It is for the tribunal to decide whether the reorganisation and reallocation of functions “is such as to change the particular kind of work which a particular employee… is… required to carry out, and whether such change has had any… effect on the employer's requirement for employees to carry out a particular kind of work”.

In this case the college had two plumbers and made one redundant when he declined to perform engineering tasks. He was replaced by an engineer who undertook some plumbing tasks. There was a redundancy because instead of two plumbers the college now only had one. 

What if the employer wants to make changes to terms and conditions?

There is no redundancy when the employer makes changes to the employees’ terms and conditions. For instance, in Chapman and ors -v- Goonvean and Rostowrack China Clay Co Ltd, the employer withdrew free transport to work because it was not economic to continue to offer it. Some employees lost their jobs because they could no longer get to work but the Court of Appeal ruled that this was not a redundancy situation.

When an employer proposes to dismiss 20 or more employees in order to implement changes to terms and conditions, they have to consult with “appropriate representatives” which means the recognised trade union (if there is one).

Conclusion

In each case, it is important to assess whether there is a redundancy situation, and if there is, whether the dismissal was caused by it. Redundancy is often used by employers as a veil for a dismissal which would otherwise amount to discrimination or victimisation, such as selecting trade union activists for redundancy.