Employment Update: Redundancy



Where employees were dismissed and re-engaged on new terms, they were not redundant because the employer’s requirement for ‘work of a particular kind’ had not ceased or diminished. When will terms in a collective agreement be incorporated into individual employment contracts?

In Maitland and others/Scully and others v Co-Operative Insurance Society the employers decided, in order to improve its financial situation, to change the way their insurance sales force operated - reducing the need for them to collect premiums from existing customers and requiring them to get out and sell more new business. This was done by terminating their existing contracts and issuing them with new ones.

Some employees objected and claimed that, in reality, they were being made redundant.

The employment tribunal found that that depended on what was meant by 'work of a particular kind' in the statutory definition of redundancy in s 139 Employment Rights Act. Had the employer's requirement for employees to carry out 'work of a particular kind' ceased or diminished?

The wording of the employment contracts was not key here. What mattered was the job that the employees actually had to do. On the facts, both the employment tribunal and the EAT decided that, although the job would be less pleasant for the employees in future, it was not work of a different kind. They were not redundant nor had they been unfairly dismissed. Their contracts had been terminated fairly for 'some other substantial reason'.

On a subsidiary issue, the employees had argued that, if they were redundant, they would have been entitled to an enhanced redundancy payment calculated in a way set out in a collective agreement which, they said, was incorporated into their individual contracts of employment.

The problem here was that the employment contracts and the collective agreement contradicted each other. The employment contracts said that any terms agreed collectively 'would have been incorporated' into the individual contracts. The collective agreement set out a redundancy process but said 'this process is not intended to form part of individual contracts'.

The tribunal decided that the wording of the employment contract took precedence over the collective agreement, as it had been entered into by the individual employees, certainly so far as the calculation of any redundancy payment was concerned. The EAT upheld this decision too.

Points to note:

· In the statutory rules on unfair dismissal there is a significant distinction as to whether dismissals are necessitated by reorganisation or by redundancy. A re-organisation may amount to ‘some other substantial reason justifying dismissal’ and thus any dismissal may be fair. Dismissals necessitated by redundancy may also be potentially fair but only if fairly handled and will entitle the dismissed employees to receive statutory redundancy payments and any enhanced contractual redundancy payments.

· The wording of employee contracts and collective agreements are crucial to the way in which they interact. In collective agreements in particular, it must be made plain whether what is being set out is an aspirational policy statement by the employer or an obligation giving employees individual legal entitlements.