David Hoey looks at the legal tests surrounding a statutory payment claim upon redundancy.

Where an employee’s position is redundant and the employee is eligible (i.e. has over two years’ service) the individual may be entitled to a statutory redundancy payment. However, in terms of the Employment Rights Act 1996 an employee who unreasonably refuses an offer of suitable alternative employment is not entitled to the statutory payment. In Dunne v Colin & Avril, the Employment Appeal Tribunal had to consider the legal tests that an Employment Tribunal would apply in this area.

In this case, the claimant worked a 24 hour week as a bookkeeper. Following liquidation of her previous employer, her employment transferred to the respondent. Discussions took place with the respondent about the claimant’s future role in the organisation. Initially, she was offered a 16 hour per week contract but she wanted more hours. The claimant was then offered a 24 hour contract involving 16 hours of bookkeeping with an additional 8 hours work in the warehouse. The claimant believed that the additional hours were not consistent with her bookkeeping skills. She decided not to accept that offer. She was then dismissed. She claimed unfair dismissal and a statutory payment.

The respondent argued that she was not entitled to a statutory redundancy payment as she had unreasonably refused an offer of suitable alternative employment (and that her dismissal was fair). The Employment Tribunal agreed with the respondent principally because her role would have been essentially the same. The Tribunal found that she was not therefore entitled to a redundancy payment.

The claimant’s appeal to the Employment Appeal Tribunal was successful. The original Tribunal’s decision had not asked the two separate questions required of the legislation: Firstly, was the offer one of suitable alternative employment? and secondly, was the refusal unreasonable?.

These questions will not always result in the same answer. Whether or not the refusal is reasonable depends upon the claimant’s subjective reasons for refusing the final offer. The Court also noted that even if the claimant was not entitled to a redundancy payment, that does not necessarily mean any dismissal would be fair. The matter was remitted to the Tribunal to reconsider.

This case reminds employers of the need to deal with redundancy situations fairly. Employers should, therefore, consider:

1. Is there a genuine redundancy situation (and can this be established)?

2. Has a fair process been followed in managing the redundancy process?

3. Are there any alternative roles that could be offered?

4. Has the employee been offered a suitable alternative role?

5. Is any refusal of such a role reasonable?

6. Would any dismissal be fair?

When considering the above, bear in mind the special rules arising in relation to those on maternity leave (and other specific statutory leaves) in relation to positive discrimination.

Taking time to get specialist advice when dealing with these situations can yield considerable savings in the longer term.