Redundancy - The Facts Part 1

We have seen a number of stories in the news in recent days and weeks relating to Redundancy in one form or another, most recently the ongoing issue with Iarnrod Éireann, yet some may be unaware of the facts surrounding Redundancies and some of the potential pitfalls that are associated with this. Owing to the sheer size of the redundancy Topic we have looked at putting together two posts on Redundancies, to include the General Overview, Fair Procedure, and finally Collective Redundancies. What Is a Genuine Redundancy? Under the Redundancy Payments Acts 1967  to 2007, there are five grounds to justify any redundancy;

1. Closure of the employers business, or its cessation in a particular location
2. The disappearance of the employee's job specifically
3. A reduction in the numbers of the workforce overall
4. The replacement of the employee by someone who can also do the work in a manner "for which the employee is not sufficiently qualified"
5. The replacement of the employee by someone who can also do other work for which the employee is not sufficiently qualified/trained.

The key to ensuring that a genuine redundancy situation exists is that the role is no longer viable commercially in line with the reasons above and that the role will not be replaced in its entirety by another employee. Importantly, the EAT have held that this extends to situations where an employee is made redundant but the work has then been sub-contracted out by the employer to a third party in an effort to cut costs. In the recent case of McGeehan and others v. Park Developments (UD 950/2008) 8 claimants, who were employed as plasterers, were deemed to have been unfairly dismissed on the grounds of redundancy as the work for plasterers was still available as sub contractors will still carrying out their work on site. The EAT determined that “the onus is on the company to establish that work was no longer being carried out at the workplace.” As the sub contractors were working long after the redundancies the EAT awarded the employees €360,000 under the Unfair Dismissals Act. How Can I Show It Is A Genuine Redundancy? In order to avoid the Park Developments situation ever arising, you should lay out a clear rationale document in keeping with the Redundancy Payments Act 1967.  A rationale document should outline the “fair” grounds for redundancy. The importance of  this rationale is essentially two-fold:

1. There is a legal requirement on employers to inform and consult with employees prior to redundancies taking effect, the preparation of the grounds for redundancy will be important in ensuring that employers are fully prepared when initiating the redundancy process and entering into consultation with employees. A well-prepared redundancy rationale will allow an employer to easily outline the need for redundancies within an organisation.
2. Section 6(1) of the Unfair Dismissals Act, 1977, provides that “the dismissal of an employee shall be deemed, for the purposes of this Act, to be an unfair dismissal unless, having regard to all the circumstances, there were substantial grounds justifying the dismissal.” Accordingly, in order to safeguard an organisation from an unfair dismissals claim, an employer needs to have fully explored the necessity of redundancies in advance of the redundancy process itself.

In light of the five grounds for a Genuine Redundancy outlined above, an employer can highlight the following in the rationale as genuine grounds for redundancy:

• the non-continuation of trading;
• the closure of business and a substantial geographical change in location;
• the reduced requirement for a number of positions within a department or category;
• continuation of trading with fewer or no staff where family members will now take on the workload;
• the need to restructure a company to ensure more advantageous trading in the marketplace (including the development of a role which includes new and more qualifications due to the restructure); or
• where you can justifiably subsume part of an employees role into the business to improve efficiency.

The rationale document should contain the following to ensure compliance with the Redundancy Payments Act 1967, in line with best practice and prevailing case law:

• The reasons for the redundancy (e.g. overall economic situation directly affecting the business, sector wide details that have led to the need for redundancy, company wide issues and also departmental issues that may directly contribute to the need for redundancy).
• The total number of employees in the business and the total number of potential redundancies.
• The details of the departments potentially affected by the redundancy.
• Any employees potentially affected on Maternity Leave or any other statutory leave or long term absence.
• A copy of the current organisation structure and the proposed structure after the proposed redundancy.
• Details as to method through which the Company will select employees for redundancy and details of any existing custom and practice in place for redundancy situations. For example, has the Company previously utilised Last-In-First-Out? Will the Company be selecting employees on a skills based method etc.
• An outline of the business strategy for future development of the company in its specific sector.
• An outline of any alternative options to redundancy that have already been taken or considered.

The more detailed the information the better, and supporting documentation is essential. What Criteria Is There In A Redundancy?

1. The Employee must have 104 weeks services (2 years) to qualify for any lump sum payments
2. Statutory lump sum payments are two weeks per year of service and one bonus week on top of this
3. Statutory payments are capped at €600 per week
4. As of January 1st 2012 an employer is entitled to a rebate of 15% following payment of redundancy lump sums to employees (prior to this an employer could claim back up to 60% a sa rebate)
5. In order to claim for this entitlement from the Social Insurance Fund an employer must fill out the RP50 form during the redundancy process
6. Collective Agreements may give rise to ex gratia payments being made in addition to statutory entitlements

In Part 2 we will look at the issue of Fair Procedures and Collective Redundancies.