Updated 2014.

If your employer is considering redundancies, in what situations can they do this?

The Employment Rights Act 1996 (the law that currently covers making redundancies) says that, ‘an employee is dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to the fact that the employer ceases to carry on the business in which the employee was employed, or ceases to carry on that business in the place where the employee was employed. A redundancy will also occur when the needs of the business for employees to carry out work of a particular kind have ceased or diminished.’

In plain English this means a Redundancy situation happens when you employer has no more, or not enough, work for you and your colleagues (for example if your employer closes or relocates the business, or now needs fewer workers).

However, it has now been confirmed that a Redundancy situation can also arise where an employer wishes to make a full-time position part time due to a reduction in work (as this is a diminution in work).

For more details about Redundancy Payments see our Guide here.

For more information about Dismissals to bring in a new contract with new terms and conditions see our article here.

A recent employment law case from the Employment Appeals Tribunal (Packman v Fauchon) confirmed that an employee who was dismissed because her employer had a downturn in work which consequently reduced the employees hours of work, was a dismissal by reason of redundancy (even though there was no reduction in the number of employees required).

Brief details of the case

Mrs Fauchon provided bookkeeping services and as a result of a downturn in the business and a new accounting software package, Mrs Fauchon was not required to work as many hours as she had previously. Her employer tried to persuade Mrs Fauchon to reduce her hours of work but she refused and was dismissed.

Mrs Fauchon complained to an Employment Tribunal that she was dismissed by reasons of redundancy and was therefore entitled to a redundancy payment. The Employment Tribunal agreed and chose not to follow a previous authoritative case law that said there must be a reduction in the number of employees before a dismissal can be regarded as redundancy.

The employer disagreed and appealed to the Employment Appeal Tribunal.

The EAT agreed with the Employment Tribunal’s decision and said that the whole of description in the Employment Rights Act (above) must be taken into account which therefore meant that 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 a redundancy.

Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.

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