The current economic climate has seen many employers looking at redundancy procedures in order to cut costs. It is well-established by case law that, even where the employer can show a real need to reduce staffing numbers due to a downturn in business, a failure to look for alternative employment within the organisation can make a redundancy dismissal unfair.
If an alternative can be found, and the employee accepts, then the employee is not redundant and their employment continues albeit potentially on different terms. If, however, the offer is of “suitable” alternative employment and the employee unreasonably rejects that offer then the Employment Rights Act specifies that the employee forfeits his or her right to a redundancy payment.
An employer who wants to rely on these provisions must have clearly made the offer of “suitable” alternative employment as an alternative to redundancy. Just mentioning that the post exists isn’t enough. The offer doesn’t have to be in writing but when it is confirmed in that way it becomes much more difficult for the employee to dispute. It is also important that the offer of “suitable” alternative employment is made before the employee's original post becomes redundant and his or her employment comes to an end.
Any offer of alternative employment should be subject to a trial period if the terms of the new employment differ in any respect from the employee's existing terms. There will almost always be some difference but the point of the trial period is for both sides to see if the new post is something that is going to work out in the long run.
The trial period starts when the employee's employment under their old contract ends and lasts for four weeks. Four weeks isn’t very long to make a decision about whether someone is able to perform in a new role but the trial period can only be extended beyond that if the employee needs to be retrained.
However, if the employer does get an immediate sense that the employee is not right for the position and seeks to terminate the employee's employment during the trial period, the employer can offer a different alternative post (with a new trial period) or can revert to the original redundancy. In these circumstances, the employee is treated as having been dismissed on the grounds of redundancy from the date on which the original contract terminated – it is as if the trial period never happened. The same is true if it is the employee who is looking to terminating the relationship during the trial period.
If the employee’s reasons for terminating during that trial period are unreasonable, and if the new position was a “suitable” alternative vacancy (as opposed to just a different role) then, as with the outright rejection of the offer of “suitable” alternative employment, the employee forfeits his or her right to a statutory redundancy payment.
Employers have often chosen not to utilise these provisions because of a whole raft of case law on what constitutes a suitable alternative, as opposed to just an alternative vacancy, and on what makes an employee’s decision to refuse unreasonable. In these more stringent economic times some employers have been revisiting this and have taken a much stronger line where suitable vacancies are available. However, the recent decision in the case Redman v. Devon Primary Care Trust has highlighted the dangers in doing so.
Mrs Readman began working as a nurse for the NHS in November 1976. From 1985, she ceased working in a hospital setting and moved to Community Nursing instead. Mrs Readman worked as a Community Nurse for over 20 years ultimately ending up in the role of Community Modern Matron which gave her the responsibility of running community and district nursing in the coastal locality of Tiegnmouth and Dawlish.
In November 2007, Mrs Readman was told that she was at risk of redundancy. The Trust had decided to re-organise its leadership structure by separating professional leadership roles from operational management responsibilities. The Trust created two new roles and invited six employees to apply, of which Mrs Readman was one.
After failing to secure one of these roles Mrs Readman was offered three alternative posts. As two of them were on a lower pay scale, the original Employment Tribunal decided that these were not suitable alternative vacancies such that the Trust would have been entitled to withhold Mrs Readman’s redundancy pay. However, the third option which was offered to Mrs Readman (the position of Modern Matron at Teignmouth Hospital) would not have involved any loss of status or financial loss.
Mrs Readman responded to the Trust’s offer by stating that her career path and qualifications were in community nursing. Mrs Readman further stated that she had not worked in a hospital since 1985 and had no desire to revert to that type of work at this point in her working life. The Trust felt that this was an unreasonable position to take and so refused to pay Mrs Readman her statutory redundancy pay.
The original Employment Tribunal agreed with the Trust’s analysis. However, the Employment Appeal Tribunal (EAT) felt that more consideration should have been given as to the reasons why Mrs Readman had refused the offer. The EAT felt that a subjective test should be used when making this assessment as opposed to a wholly objective test.
The EAT felt that the reasons given by Mrs Readman for rejecting the offer (difficulties in adjusting to hospital work after 23 years of Community Nursing) were sound and justifiable and that as such it was not unreasonable for her to turn down the Trusts’s offer.
The consequence of this ruling is that it opens the door for employees to raise all manner of objections to offers of seemingly suitable alternative employment. While in the past employers may have been able to bat these objections away, employers will now have to give due consideration to the reasons and consider whether or not they constitute a sound and justifiable rationale for not accepting suitable alternative employment before they refuse to provide a redundancy payment.
The likelihood is that, unless the employee’s reasons for not accepting the offer are very poor indeed, employers will need to pay redundancy payments to avoid Employment Tribunal hearings where the rationale will be assessed from the employee’s point of view thereby making the outcome very difficult to predict.