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Case update (4): Voluntary redundancy – Beware unfair dismissal

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Summary:  Where an employee volunteers for redundancy is it automatically a fair dismissal?

No, says the EAT in White v HC-One Oval Ltd (available here) and the Tribunal was wrong to strike out the employee’s claim (for having no reasonable prospects of success) without first hearing evidence on the events which led to her voluntary redundancy request.

Background: Voluntary redundancy is when an employee chooses to be made redundant. It is not mandatory for employers to offer (or accept) voluntary redundancy (unless there is a contractual obligation to do so) but it helps reduce or avoid compulsory redundancies and show that a fair procedure has been followed if these are required (particularly in a collective redundancy situation).

Voluntary redundancy is a dismissal by the employer (in most cases). In Optare Group Ltd v Transport and General Workers Union the EAT said that voluntary redundancy is a dismissal (by reason of redundancy) when it is by the invitation of the employer as part of a redundancy process. It is only a termination by mutual consent when the employee makes an informed choice to terminate their employment before, or outside of, any redundancy process (Khan v HGS Global Ltd).

Voluntary redundancy dismissals (which are part of a wider redundancy process) are subject to the usual test of fairness under s98 of the Employment Rights Act. In other words, employers will need to be able to show there was a genuine redundancy situation (not a sham) which meets the statutory definition of redundancy (s139 ERA); the dismissal was caused wholly or mainly by that redundancy situation; a fair procedure was followed (including consultation and fair selection) and the decision to dismiss fell within the band of reasonable responses.

Facts:  Ms White was employed as a part-time receptionist in a care home owned by HC-One Oval Ltd (‘HC-One’). Ms White was provisionally selected for redundancy when HC-One restructured its reception and administration team. During the consultation process Ms White requested to take voluntary  redundancy and this was accepted by HC-One.

Ms White claimed unfair dismissal. She alleged that she had been targeted for dismissal (and the redundancy process was a sham) because:

  • She had recently raised a grievance that she had not been paid for providing additional administration support to cover staff illness; and
  • HC-One wanted a full-time receptionist (this role was recruited to just before the redundancy process started) who had no childcare responsibilities (unlike Ms White).

Ms White further alleged that she had not been offered an available administrative role as alternative employment.

Tribunal decision

The Tribunal struck out Ms White’s claim on the basis that it could have no reasonable prospects of success. It said Ms White’s claim was ‘fundamentally flawed’ as she had volunteered for redundancy and could not therefore deny the existence of a redundancy situation, or claim that decision to dismiss was unfair.

Ms White appealed.

EAT decision

The EAT held that the Tribunal was wrong to strike out Ms White’s claim. Not every voluntary redundancy situation is automatically a fair dismissal. The Tribunal should not have ignored Ms White’s complaints about the process leading to her request for redundancy. It needed to hear evidence on this before deciding whether the dismissal was fair.

Implications: This is a useful reminder that voluntary redundancy (in most cases) is a dismissal which needs to meet the requirements of s98 ERA to be ‘fair’. There needs to be a fair reason for dismissal (i.e. a genuine redundancy) and a fair process (including consultation and selection).

If an employee is dissatisfied about how they have been treated (whether before or during the redundancy process) be careful before offering or accepting any request for voluntary redundancy. Deal instead with the employee’s outstanding concerns (including completing any grievance process) and take steps to put right any potential flaws in your redundancy process and any (perceived) mistreatment of the employee.

If you are not comfortable that this can be achieved, it is preferable (and likely cost effective) to wrap up the terms of the voluntary redundancy in a settlement agreement. This way the employee waives any claims they feel they may have and saves the costs of dealing with a Tribunal claim, even if it may mean providing a (further) enhanced redundancy package to encourage settlement.

Return to Menzies Law Newsletter 2022 Issue 2

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