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What if there is less work (and fewer hours) but no cut in headcount?
[ch 11: pages 362-363]It has been settled law for many years that to claim a redundancy payment or to bring a claim for unfair redundancy dismissal, the employer must need fewer (or no) employees to do work of a particular kind or in a particular location. In other words there must be a reduction in headcount. This is based on the wording of section 139, ERA 96, set out at the start of this Chapter.
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 the amount of work available, there can be a redundancy situation even though the employer retains the same number of employees, as long as the employer needs them to work fewer 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 correct, it means there could 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 relevant case:
Ms Fauchon was a bookkeeper. As a result of a downturn 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 she refused she was dismissed. The employer refused to pay a redundancy payment, arguing that there was no redundancy situation because he still needed a bookkeeper, albeit 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 this 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, and has important implications for employees who are asked to agree to a significant cut in hours.
However, in the same year, a Scottish EAT reached the opposite conclusion in the following case, when they followed the established law, which is that a redundancy situation does require a cut in headcount:
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 for reps and negotiators to note that the employers in both of 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). This area of law is confusing and unsatisfactory and careful legal advice must be taken.
It is worth remembering, in the context of enforced cuts to hours, that employees also have separate statutory rights to request a redundancy payment in the context of lay off or short-time working, as long as a prescribed procedure is followed strictly. These rights are described on page 408.