Redundancy – same number of employees but less work

Does there need to be a reduction in the number of employees to satisfy the definition of redundancy?

Settlement agreements are often used in redundancy situations.

In the case of Packman t/a Packman Lucas Associates v Fauchon the Employment Appeal Tribunal confirmed that it is not always necessary to have a reduction in the number of employees carrying out work of a particular kind in order to satisfy the definition of redundancy.

The definition of redundancy can be found in the Employment Rights Act 1996. The definition reads that “an employee is dismissed by reason of redundancy if their dismissal is wholly or mainly attributable to the fact that their employer’s requirements for employees to carry out work of a particular kind have ceased or diminished or are expected to do so”.

In Packman t/a Packman Lucas Associates v Fauchon the Claimant was employed as the company’s only bookkeeper. A downturn in work and the recent introduction of a new software system, meant that the employer no longer needed the Claimant to work as many hours as she did currently. The employer attempted to agree a reduction in the Claimant’s contractual hours but the Claimant refused and was subsequently dismissed. The Claimant brought a claim for redundancy.

The Employment Tribunal sided with the Claimant and agreed that she had been dismissed by reason of redundancy. However, the employer argued that the definition of redundancy can only be satisfied where there is a reduction in the number of employees, and that because the Claimant’s hours had been decreased as opposed to the number of employees being decreased there was no redundancy situation. The Employment Appeals Tribunal supported the original Employment Tribunal’s decision confirming that a reduction in hours due to the business needs of the employer may still give rise to a redundancy situation.

It is important to remember that the employment tribunal will continue to make decisions on a case by case basis but what is apparent from this case is that the tribunal are susceptible to viewing ‘employees’ and ‘work’ as one and the same. Thus if the amount of work available for the same number of employees is reduced a redundancy situation may arise the same way as where an employee is dismissed because the business needs fewer employees.

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