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What if there is less work but no cut in the number of employees?
It had been settled law for many years that to claim a redundancy payment or to bring a claim for unfair redundancy dismissal, the employee must be able to point to a reduction in headcount. In other words, the employer must need fewer (or no) employees to do work of a particular kind or in a particular location. This is based on the wording of section 139 ERA 96 (page 323).
However, the law on this important question is no longer certain. In Packman t/a Packman Lucas Associates v Fauchon [2012] UKEAT/0017/12/LA, the EAT ruled that as long as there is a downturn in work, there can be a redundancy situation even though the employer needs the same number of employees, as long as the employer needs fewer working hours. In other words, this case suggests that there can be a redundancy dismissal, triggering a right to a redundancy payment, even if there is no reduction in headcount, as long as there is a fall in the amount of work that needs doing. If this it correct, it means there can be a redundancy situation where an employer wants an employee to change from full-time to part-time hours because of a reduced need for their services. Here is the case:
Ms Fauchon was a bookkeeper. As a result of a downturn in business and the introduction of new accounting software, her employer needed her to work fewer hours. The business still needed the same number of employees, one bookkeeper, but to do less work. Fauchon’s employer had no contractual right to demand that she reduce her hours and when Fauchon refused to work fewer hours she was dismissed. The employer refused to pay a redundancy payment, arguing that there was no redundancy situation because he still needed a bookkeeper, just one who was prepared to work fewer hours. The EAT ruled that Fauchon was dismissed for redundancy and should receive a redundancy payment. Although her employer still needed a bookkeeper, it needed one who was prepared to work fewer hours and it was her refusal to work fewer hours that led directly to her dismissal. This was a redundancy situation.
Packman t/a Packman Lucas Associates v Fauchon [2012] UKEAT/0017/12/LA
This case approaches redundancy by counting hours (the full-time equivalent (FTE) test), rather than heads. It has important implications for employees who are asked to agree to a significant cut to their hours. It suggests that in some circumstances, they may be able to claim a redundancy payment.
However, in the same year, a Scottish EAT reached the opposite conclusion in the following case, when they ruled that there can only be a redundancy situation where there is a cut in the number of employees:
A taxi radio-control operator was asked to cut her hours, especially at night, to save costs. She refused and when her employer imposed the cut in hours in breach of her contract, she resigned and claimed constructive unfair dismissal and redundancy. The Scottish EAT said that this was not a redundancy situation because there was no reduction in headcount. The taxi company still needed the same number of employees (one) to do radio control work. They just needed her to work fewer hours, especially night shift hours. There could be no redundancy, said the EAT.
Welch v The Taxi Owners Association (Grangemouth) Limited [2012] UKEAT/0001/12/1506
Whichever approach is found to be correct, it is important to note that the employers in these cases had no contractual right to insist on a cut in hours. Where an employer has an express contractual right to insist on changes such as a cut in hours or a relocation, a refusal to agree can lead to a fair dismissal for refusing to obey a lawful order (Home Office v Evans [2007] EWCA Civ 1089) (see below). This area of law is confusing and unsatisfactory and careful legal advice must be taken.