Shut down and shut out

In the current economic climate, thousands of employees have been made redundant. And many more face losing their jobs. Richard Arthur gives advice on checking whether the redundancies are genuine, what rights employees have to alternative employment and what compensation might be available

The law says there is only a genuine redundancy situation when:

  • an employer closes the 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 an employer closes the business and then reopens as something completely different, that would also count as a genuine redundancy. In Whitbread plc t/a Whitbread Berni Inns -v- Flattery and ors, however, the court said that changing the business from a Berni Inn to a brasserie four weeks later was not a closure of the old business.

But even if someone’s workplace is actually closing down, employees can sometimes be found work elsewhere, depending on what their contract of employment says. In Home Office -v- Evans and another, the employer closed the immigration control facility at Waterloo International Terminal, but then invoked the mobility clauses that required the employees to work elsewhere.

What if the employer just needs fewer people to do the work? The law says that this covers situations where:

  • 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 ruled that the test was whether the dismissal was wholly or mainly “attributable” to one of the definitions of a genuine redundancy.

However, there is no redundancy when the work remains the same, although the employer has made changes to 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 uneconomic. 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.

But when employers are consulting over collective redundancies, the definition of redundancy is wider and covers “any dismissal for a reason not related to the individual concerned...” This would cover, for example, dismissals for the purpose of implementing changes to terms and conditions of employment.

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.

Suitable alternative employment

Employers are required by law to look for suitable alternative employment for their redundant employees. If they don’t, the dismissal is likely to be unfair.

When looking for alternative work, employers should:

  • ensure they do not limit their search to the same section of the business that the employee worked in although it may be going too far to require them to search among associated companies/employers
  • consider posts that are already filled, even if that means “bumping” the person in that post
  • consider giving preference to long-standing employees ahead of newly recruited employees (although this may now be discriminatory on grounds of age)
  • consider actually offering the job (not just looking for it) to an employee, even if it constitutes a demotion. It is up to the employee to decide whether they are prepared to accept it or not 
  • identify transferable skills as part of the consultation process
  • give sufficient information to the employee (including financial prospects) 
  • consider retraining the employee if that would be reasonable.

Employers are not expected to make an offer of suitable, alternative employment if that would contradict an agreement made with the union.

A redundant employee who refuses a suitable offer of alternative employment will lose their entitlement to a redundancy payment if:

  • the offer was made after they were given their notice 
  • the offer was made before their notice ended
  • the new role took effect within four weeks of the end of the old job
  • they were unreasonable in refusing the offer.

It is up to a tribunal to decide if the alternative job is suitable by looking at what the whole job entails, not just the tasks to be performed. It also looks at the terms and conditions (especially hours and wages) and the responsibility and status involved. Location may also be relevant. As a tribunal said in one case “Commuting is not generally regarded as a joy”.

Time off during the notice period

Employees with more than two years’ service who are under notice of redundancy have the right to reasonable time off with pay during working hours either to look for work or to make arrangements for future training for employment. An employee must actually request the time off in order to be entitled to it.

Tribunals will consider a number of factors when deciding whether the employer was unreasonable in refusing the request. These include:

  • the length of the notice period
  • when the employee put in the request
  • local difficulties in obtaining employment
  • the provisions of any redundancy procedures agreement
  • the effect of the employee’s absence on health and safety and
  • the effect of the employee’s absence on the running of the business.

If someone is unreasonably refused time off during the notice period, they can complain to a tribunal within three months of the day on which the time off should have been allowed.

Redundancy payments

Employees with two years’ continuous employment at the date of termination of employment who have been dismissed by reason of redundancy are also entitled to a statutory redundancy payment.

The amount depends on age, length of service and pay, as follows:

  • one and a half weeks’ pay for each complete year of service after reaching the age of 41
  • one week’s pay for each complete year of service between the ages of 22 and 40 inclusive
  • half a week’s pay for each complete year of service below the age of 22.

The maximum length of service that may be taken into account is 20 years and a week’s pay is limited to £350 per week.

Some employees are contractually entitled to an enhanced redundancy payment, details of which may be set out in a staff handbook or collective agreement in which case they would have to prove that the term was incorporated into their contract of employment.

If the employer fails to make the payment, employees can complain to a tribunal within six months of the date of termination of employment (or within such time as the tribunal considers just and equitable). The statutory grievance procedure only applies until this April, after which it will no longer be necessary to lodge a grievance.

Anyone entitled to a contractual enhanced redundancy payment should complain to a tribunal within three months of the termination of employment, (the maximum award is £25,000). The statutory grievance procedures do not apply, but a failure to file a grievance may lead to a decrease in the award.