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First published in CSR Law Report on 1 August 2012
A reduction in headcount is not required to establish whether a person was dismissed for redundancy
Ms Fauchon (F) was employed to provide book-keeping services by Packman t/a Packman Lucas Associates ("P"). Following a downturn in business and the introduction of a new accountancy software package, P had a need for fewer hours to be worked providing book-keeping services. P sought to persuade F to reduce her hours per week but she refused. As P no longer required her to work those hours it gave her notice of dismissal. F brought a claim for unfair dismissal. The employment tribunal had to determine whether F was entitled to a redundancy payment.
Section 139 of the Employment Rights Act 1996 provides that dismissal will be by reason of redundancy when it is attributable to the fact that the requirements of the business "for employees to carry out work of a particular kind... have ceased or diminished or are expected" to do so. The tribunal held that F had been dismissed by redundancy and was entitled to a redundancy payment. P appealed, arguing that the dismissal was not because of redundancy since F required the same number of employees both before and after F's dismissal.
The Employment Appeal Tribunal (EAT) upheld the tribunal's decision. The EAT confirmed that the words of the statute should be looked at as a whole. The EAT considered Aylward v Glamorgan Holiday Home Ltd t/a Glamorgan Hotel EAT/167/02 ("Aylward") in which, because of an economic downturn, the business required employees to reduce their work from 52 weeks a year to 42 weeks. Those who refused were dismissed and replaced. The EAT in that case concluded that these dismissals were not by reason of redundancy because the staffing levels of the employer had not changed.
However, the EAT in this case departed from that Aylward. If an employer needs a fewer amount of employees to do the same amount of work, and the employees are dismissed for that reason, they are dismissed by reason of redundancy. However, if the amount of work available for the same number of employees is reduced, a dismissal of an employee caused wholly or mainly for that reason is also a redundancy. On the other hand, if there is just as much work for just as many employees, a dismissal arising out of that situation would not be for redundancy.
This case clarifies that a reduction in headcount is not required to satisfy the statutory definition of redundancy and the decision is welcome, given the inconsistency in the case law. Employers may therefore be required to make redundancy payments where an employee is dismissed as a result of a reduction in their hours. However, a reduction in hours will not always give rise to a redundancy situation.
Packman (t/a Packman Lucas Associates) v Fauchon (EAT/0017/12)
Lee Harding, Associate, in our Employment and Pensions Group at Field Fisher Waterhouse LLP