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What if there is less work but no cut in the number of employees?
[ch 11: pages 316-317]It has been established law for many years that to have a genuine redundancy situation for the purposes of a claim for unfair dismissal or a redundancy payment, there must be 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 (section 139 ERA 96).
However, in a recent case, Packman t/a Packman Lucas Associates v Fauchon [2012] UKEAT/0017/12/LA, the EAT has suggested that there can be a redundancy situation where there is less work to do, even though the employer needs the same number of employees, spread over 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, (actual or anticipated), as long as there is a reduction in the amount of work that needs doing:
Ms Fauchon was a bookkeeper. As a result of a downturn in business combined with 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.
The employer had no contractual right to demand a cut in hours, and when Ms 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 the same number of employees.
The EAT ruled that Ms Fauchon was dismissed for redundancy and was entitled to 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.
Packman t/a Packman Lucas Associates v Fauchon [2012] UKEAT/0017/12/LA
This useful case approaches redundancy by counting hours rather than heads (the full-time equivalent (FTE) test). It has important potential implications for employees who are asked to agree to a significant cut to their hours (but not a large enough cut to amount to statutory short-time working (see page 109). However, it is crucial to note that the employer in this case had no contractual right to insist on a cut in hours. Where an employer has a contractual right to insist on changes such as a cut in hours, 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 page 317).
In any event, the law still remains uncertain as a Scottish EAT reached the opposite conclusion in Welch v The Taxi Owners Association (Grangemouth) Limited [2012] UKEAT/0001/12/1506. In this case, the EAT decided, based on established law, that there can only be a redundancy situation where there is a cut in the number of employees required by the employer:
A taxi radio-control operator was asked to cut her hours, especially night shift hours, to save costs. She refused. When the employer imposed the cut in hours in breach of her contract, she resigned and claimed constructive unfair dismissal. The Scottish EAT said that this could not be a redundancy situation because there was no reduction in headcount. The taxi company still needed the same number of employees to do radio control work, even though they needed fewer hours, especially night shift hours, so there could be no redundancy.
Welch v The Taxi Owners Association (Grangemouth) Limited [2012] UKEAT/0001/12/1506