Restructuring and Redundancy
The last twelve months has forced us to be much more creative in terms of our thinking and approach to work. People have been very innovative and adaptive and technology, especially for remote working, has advanced exponentially. This came at a time when platform work was on the rise and people generally wanted more flexibility with regard to when and where they worked.
Regardless of when, the probability of people resuming work after Covid-19, on the same basis as existed prior to this pandemic, is extremely unlikely for many workers.
Considering the Impact of Future Trends on Restructuring
Employers have to be very conscious of future trends and must be able to achieve the right balance between their ability to attract and motivate staff, whilst achieving and maintaining some form of competitive advantage. Future competition may also come from “green field” start-up’s which will be able to take full advantage of these trends.
Start-ups, and to a slightly lessor degree recruiting new workers, provides the greatest opportunities for being more creative in designing new forms of work contracts. For people who have existing contracts of employment it is important to remember that these are legally binding and can only be changed by the agreement of each individual. In addition, there are likely to be challenges for employers with some existing employees wanting to work remotely (on terms that suit them personally) and others who might want to return to a place of work when the employer wants them to work remotely (on terms that suit the organisation).
The first and most important thing to remember is that anything can be changed through agreement. Agreement can come from a preference that the individual wants, or when presented with negative alternatives, the less negative option becomes acceptable.
To achieve significant change quickly redundancy may be the best option. It is strongly advisable that the process gives impacted individuals the opportunity to offer alternatives to redundancy and the company should be seen to give proper consideration to these.
There are four potential categories that employers may consider.
1. Things that are no longer viable or possible, we don’t have a choice, change must happen. This includes things that we can stop doing now that are no longer fit for purpose.
2. Essential things that still need to be performed in the same or a similar manner as heretofore.
3. Immediate and urgent things that we now have to do to continue in business. Different from what we did before. These issues may be temporary or more permanent in nature.
4. Doing or performing different things in different ways. Fundamental review of the business or how we do what we do. For some new roles, an employer may want to change the productivity mindset to put an emphasis on the work completed so that reward structures recognise performance delivered rather than paying solely for working time.
A voluntary severance scheme (that need not be a redundancy) may allow the employer to very quickly reduce the number of existing employees and introduce change equally quickly. As part of a voluntary severance the employee resigns from their contract of employment and usually, in return for an ex-gratia payment, signs a full and final settlement agreement.
Terminating a contract of employment without the employees agreement can expose an employer to significant legal challenge, including under unfair dismissal legislation resulting in possible re-instatement (putting the individual back into the same job they had and paying for any loss in the interim), re-engagement (giving them the same or a similar role and not paying fully for any loss) and compensation (up to 2 years remuneration). However, redundancy can be a legitimate defence to claims for unfair dismissals.
As a general principle, claims made under the Redundancy Payments Acts usually relate to people not receiving their statutory entitlements or from unfair selection procedures or where the issue of redundancy is being claimed (such as arising out of lay off or short time working, these channels have been temporarily suspended during the covid crisis). Such claims can only relate to statutory redundancy entitlements and any ex-gratia terms are therefore excluded.
Most claims relating to redundancy are referred under the Unfair Dismissals legislation and relate to the genuineness or otherwise of the redundancy and/or the selection process by which individuals were selected to be made redundant. It is important to remember that in a redundancy it is the position that is made redundant and that as a result, an individual’s employment contract is terminated (they are dismissed) by reason of that redundancy. It is a dismissal and therefore the onus of proof is on the employer (i.e. The dismissal is presumed to be unfair unless the company can prove on the balance of probability they did not act unfairly) to prove a genuine redundancy and that they engaged in a fair selection process. Essentially this means they must establish fair and relevant selection criteria and apply such criteria fairly. It also means that meaningful consultation has to take place with the employees impacted.
Compensation as a means of redress deals with actual loss resulting from a dismissal that the employer failed to prove was not unfair. The employee has an obligation to mitigate their loss and must be able to demonstrate significant efforts to find employment. They have to be available to work (periods of sickness do not apply) and any monies they receive will reduce the loss. Where no loss is established the maximum award is up to four weeks’ pay.
Let there be no doubt that redundancy is not a cheap option. The statutory payment is two weeks’ pay for each year of service, or part thereof, plus one additional week. A cap of €600 applies to weekly pay for statutory purposes. Notice unless where it is worked, will also be an additional cost.
In larger employments, an ex-gratia payment on top of the statutory, may apply at the discretion of the employer. Whilst the terms may vary, according to the circumstances of the business, the pay back for such an outlay may take several months or even years to achieve. In times of great uncertainty, as we are in now, careful consideration needs to be given to all other options prior to making a substantial investment in redundancy and for many SME’s, the application of the statutory redundancy terms may be barely affordable.
Remember also, that the employer could face industrial disruption or legal challenges which could involve additional costs and a significant distraction from the real business.
Reasonable Alternative Employment
There can be occasions where employees claim redundancy, outside of lay off and short time working, and the employer disputes this. A typical example is where changes take place about roles or place of work. The employer might argue that the change was necessary and if they were to let this person go they may have to replace them, be that in a different role or location. In such circumstances the employer can argue that they offered reasonable alternative work to the individual concerned.
If the employer can establish that the offer constitutes reasonable alternative work (usually meaning similar hours of work and remuneration. RAW... location/ similar skillset being used ) then the individual concerned will not be entitled to redundancy.
Definitions of Redundancy
The definitions of redundancy are very broad and almost all embracing, providing employers plenty of scope in determining (no agreement needed) a redundancy situation exists and consequently dismissing employee(s) by reason of that redundancy.
Section 7(2) of the main Act states that
“…. An employee who is dismissed shall be taken to be dismissed by reason of redundancy if, for one or more reasons not related to the employee concerned, the dismissal is attributable wholly or mainly to –
(a) the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased or intends to cease, to carry on that business in the place where the employee was so employed, or
(b) the fact that the requirements of that business for employees to carry out work of a particular kind in the place where he was so employed have ceased or diminished or are expected to cease or diminish, or
(c) the fact that his employer has decided to carry on the business with fewer or no employees, whether by requiring the work for which the employee had been employed (or had been doing before his dismissal) to be done by other employees or otherwise, or
(d) the fact that his employer has decided that the work for which the employee had been employed (or had been doing before his dismissal) should henceforward be done in a different manner for which the employee is not sufficiently qualified or trained, or
(e) the fact that his employer has decided that the work for which the employee had been employed (or had been doing before his dismissal) should henceforward be done by a person who is also capable of doing other work for which the employee is not sufficiently qualified or trained.
Caution When It Comes to Redundancy
Redundancy is not an opportunity for employers to remove their worst employees and keep their best. Redundancy cannot be personal and must always be about the role at issue, so it is critical that the “cart does not come before the horse”. If you have a problem with an individual’s performance then deal with it as a performance issue through the disciplinary process. It can be very difficult for an employer who has had issues with an individual to subsequently have a redundancy situation and this same individual just happens to be selected.
Redundancy can have the impact of reducing costs which often in practice results from a legitimate redundancy. However, if it involves replacing higher cost workers with cheaper labour the employer will be exposed to potential and significant legal and industrial relations challenges.
This is usually the biggest area where challenges arise and in Stratis we would recommend the following;
1. The criteria should relate to the actual work to be done and congruent with previous occasions where recruitment or promotion has taken place for similar position.
2. Care needs to be taken not to introduce new idealistic criteria especially where it might be demonstrated that it favours some candidates over others.
3. Those involved should be given the opportunity, in advance of the process, of commenting on the criteria.
4. A marking system should be used that will demonstrate the fair application of the criteria to each applicant.
5. There ought to be an opportunity for appealing any selection outcome, if they are not happy with the initial response.
Redundancy is always a regrettable event in any employment and where it becomes necessary, it should be considered a long term investment and that the employer is confident of achieving a justifiable return on this investment.
If such an investment is to be made then the employer needs to ensure the outcome provides a good return and ensures competitive advantage for a sustainable successful future.
It is always prudent to be cautious and to seek advice at the earliest stages to avoid unforeseen consequences and to minimise cost and risk.
If you would like to talk to us about any of the above issues or about engaging your people through the period ahead, please get in touch with me at email@example.com or any one of our Partners.
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Disclaimer: The information in this article is for practical guidance only and does not constitute legal or specific case advice. The answers to specific situations will vary depending on the circumstances of each case. This is not a substitute for specific professional advice relevant to individual circumstances facing your business.