Many businesses will suffer a downturn in revenue as a result of the COVID-19 pandemic.  Although the Government has put in place measures to help businesses retain their employees, for some it may be necessary to restructure in order to survive, including making employees redundant.

If restructuring becomes necessary, it is important to keep in mind there are a number of requirements and steps involved in undertaking a legitimate redundancy process. If these requirements are not adhered to, the employer may be vulnerable to employees raising personal grievances against them, and this in turn, can result in significant and otherwise avoidable costs to the employer. 

There are two key ingredients to a justifiable redundancy: good cause and a fair process.

Good Cause:

A business must have a genuine reason to be make an employee redundant. The most common reasons include:

  • The business is ceasing to offer a particular aspect of its service;
  • The business cannot financially sustain the number of employees; or
  • The business has engaged contractors to undertake a particular aspect of its business.

A business may not use redundancy as a disguise for eliminating an unwanted employee.  Doing this may result in a personal grievance being raised by the employee. 

A business should be able to show evidence of its reasons for wanting to restructure.  In the current environment with the additional support available from the Government, employers will need to show that the support provided is not sufficient to avoid the need to restructure. 

Fair Process:

When initiating a redundancy process, the employer must prepare a proposal setting out the reasons for the restructure.  This document must be specific, in writing, and include the proposed outcomes (for instance clearly setting out which roles will be likely be affected).  The proposal should also detail the process that will followed: setting out the steps that will be followed, and the anticipated timeframes involved.

Once this document has been prepared, all potentially affected employees should be notified in writing.  Many employers prefer to first make the announcement in person to each affected employee, before providing the written proposal.  If there are several employees likely to be impacted, then a group meeting may be the most efficient way to announce the proposal.  Where employees belong to a union, the union must also be notified in accordance with the terms of any collective employment agreement. 

Affected employees should be invited to provide their feedback to the proposal. This can take place in writing, or in person at a proposed meeting date, or both.  In the current environment, such meetings will need to take place via telephone or video call.

Employees should be advised to seek legal advice before they provide their feedback, if they wish to do so.  Employees are also entitled to have a support person or representative assist them in providing their feedback and attending any meetings. 

Businesses who belong to an Employee Assistance Programme (or EAP), should remind their employees to access this service if they need to. 

At the follow-up meeting where feedback is given, the proposal should be discussed and feedback should be invited from the affected employee and/or their representative.  Employers are advised to keep accurate notes of the feedback, so that they can take time to consider what was discussed after the meeting.  A failure to keep notes will be regarded by the Court and Employment Relations Authority as a failure to genuinely take the feedback into account.

It is important for an employer to makes a genuine effort to consider the feedback provided by the affected employees, before any final decisions are made. 

After taking time to consider the feedback, an employer must decide how they will proceed, and then let the employees know.   Redeployment to other roles must also be considered before an employee is made redundant. Where an employee will be made redundant, the employer should provide written notice of the decision, in accordance with the affected employees’ employment agreements.  Where redundancy compensation is required under the employment agreement, this must also be paid.    

Despite the lockdown and impact of COVID-19, it is crucial that business continue to comply with employment law requirements, including: acting in good faith, and following a fair process.  If an employer is not sure about the process, they are advised to seek advice before acting. 

Leading law firms committed to helping clients cost-effectively will have a range of fixed-priced Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

We are set up to assist you remotely via email, telephone or video call.