The minefield of redundancy
What employers and employees need to know
The much debated amendment to the Employment (Jersey) Law 2003, affording greater protection to employees in a redundancy situation, came into force on 1st January 2011. Essentially the amendment grants employees statutory redundancy pay, revised minimum statutory notice periods and time off work to seek alternative employment or undertake training.
What is redundancy?
Generally speaking, redundancy is a situation where the employer decides to reduce the number of staff within the business. This may be in a particular branch or department or a particular role. There may be any number of reasons why an employer considers redundancy, however the law is not concerned with the employer’s business decisions.
In a disputed redundancy situation the Employment Tribunal must be satisfied that redundancy was the genuine reason for the dismissal. In making this decision, the Tribunal will consider whether the statutory definition of redundancy contained in Article 2(1) of the Employment (Jersey) Law 2003 is satisfied. This may mean that there has either been a business or workplace closure or a diminished requirement in the business for employees to do work of a particular kind.
Did the employer adopt a fair procedure?
The Employment Tribunal will then go on to look at the fairness of the procedure adopted by the employer. This is a potential minefield for employers, who need to ensure that they follow the correct procedure and apply it fairly, otherwise the employee may be able to claim a redundancy payment and also compensation for unfair dismissal through the Employment Tribunal.
The first stage in the process is for the employer to warn employees of the possibility of redundancy and consult with them. Consultation must be meaningful, to the extent that the employees must understand what they are being consulted about and given the opportunity to put forward their views. This may involve discussion about alternatives to redundancy, such as shorter working hours or a reduction in pay. The next stage is for the employer to select a pool of employees from which it will ultimately select those who are to be made redundant. The employer should then fairly apply selection criteria to those within the pool. The selection criteria must be reasonable and applied objectively. A potentially fair selection criteria may include scoring employees for example on the basis of performance, attendance and disciplinary records. Following on from the scoring process, the employer will identify those employees who are to be made redundant. The employer should disclose to each of those employee how they scored and the basis on which the scoring was carried out and allow them the right of appeal.
Once an employee has been selected for redundancy, the employer should consider whether suitable alternative employment can be found for them within its organisation. The requirement for the employer to adopt this fair procedure has been in place since the enactment of the Employment (Jersey) Law 2003.
In an amendment to the existing law which is awaiting the approval of the Privy Council, an employee who refuses an offer by the employer of the same, or similar employment to commence within four weeks of being made redundant, will lose the right to statutory redundancy pay.
What is statutory redundancy pay?
Up until 1st January 2011 a redundant employee was not entitled to a redundancy payment unless his contract specifically provided for it. He would however have been entitled to compensation for unfair dismissal had the employer not adopted the fair procedure referred to earlier.
There is now a statutory entitlement to a redundancy payment. This is calculated as one weeks’ pay per year of service. There is an upper limit on the value of a weeks’ pay, which is based on the average weekly earnings in Jersey as published by the States of Jersey Statistics Unit, which is currently is currently £630 per week. It is important to note however that there is a ceiling of £10,000 on the Employment Tribunal’s power to make awards for claims other than those relating to compensation for unfair dismissal.
Who qualifies for a statutory redundancy payment?
To be entitled to a statutory redundancy payment, the employee must have a minimum of two years’ service and must have worked eight hours a week or more, though a further amendment removing the latter requirement is awaiting the approval of the Privy Council. Service under the age of 16 years and over the age of 65 years counts. Furthermore, an employee under a fixed term contract, may claim a redundancy payment where they have two years’ service, under either one fixed term contract or a number of successive fixed term contracts, with not more than 26 weeks break between any of them.
In addition, employees with zero hour contracts may be covered where the reality of the employment relationship is that there is a mutuality of obligation on the employer to provide work and the employee to accept – meaning that the employee has been in regular employment with that employer.
Changes to statutory notice
The other major change in the law is a reduction in the minimum periods of notice an employee is entitled to receive from an employer, on termination of employment. Statutory notice periods are reduced to one week per year with a maximum of 12 weeks.
The statutory notice periods were more generous prior to this amendment. The reason being that at that time there was no entitlement to a statutory redundancy payment and so an entitlement to generous notice periods under the law was seen as protection for employees. The minimum notice that an employee must give an employer has not changed and is set out in the Employment (Jersey) Law 2003.
What else is new?
The employee has the right to take 40% of the working week off and be paid for it, to train or seek alternative employment (this is the equivalent of two days in a five day week and is a one off event). Where the employer fails to comply with such a request the employee may complain to the Tribunal within eight weeks of the right to the time off accruing. The Tribunal may order the employer to pay to the employee a sum greater than 40% of the employee’s weekly wage. The Tribunal has a discretion to extend that eight week time limit.
Employment relationships in Jersey are becoming increasingly more regulated. The 6th amendment to the existing employment law is awaiting the approval of the Privy Council. Further legislation is in the pipeline including legislation relating to discrimination and the transfer of business undertakings. Such regulation brings with it greater protection for employees. Employers who do not have redundancy policies and procedures in place should be very wary of making redundancies, without seeking advice from JACS and/or their legal advisers.