Voluntary redundancy – Are you really safe from an unfair dismissal claim?

Blog | Employment
Published: 11th May 2022
Area: Corporate & Commercial

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Until recently it is fair to say, that where a business is having to consider making compulsory redundancies and employees are given the ability to volunteer for redundancy (often on the basis of an enhanced redundancy payment), the likelihood of an unfair dismissal claim being presented is somewhat negligible.

However, a rather large shadow has been cast over that general proposition by the recent case of White v HC-One Oval Ltd.  While the facts of this case are slightly unusual for most voluntary redundancy scenarios, it does provide us with a refreshing reminder that we should not assume that voluntary redundancy is a risk free option.  It should not be forgotten that voluntary redundancy is after all a dismissal and not a resignation.

Ms W worked part-time as a receptionist. She raised a grievance alleging that she had not received an acting up allowance.  However, shortly after her grievance was submitted, HC-One announced that it was reducing the number of employees carrying out reception and administrative work. Ms W was provisionally selected for redundancy, and she subsequently requested voluntary redundancy, which was agreed.

Because Ms W had requested voluntary redundancy, and had left the business, HC-One decided that they would not progress her grievance.

Having left the business, Ms W submitted a claim for unfair dismissal.  She argued that the redundancy was a sham on the basis that HC-One had taken on a new full-time receptionist several months before the redundancy exercise, and that this person had been retained to do both reception and administrative work. Ms W alleged that she had been targeted because the company wanted to get rid of part-time staff and also because she had raised a grievance.

As part of the defence, HC-One submitted an application to the employment tribunal (ET) asking for her claim to be struck out because it had no reasonable chance of succeeding (given that she had volunteered for voluntary redundancy).  The application was successful and the ET struck out her claim.

Ms W appealed to the employment appeal tribunal (EAT) and was ultimately successful.  The EAT found that the tribunal should not have struck out the claim.  If Ms W's account of the background to the redundancy was accepted (which the ET did not consider), the facts known to the decision maker (i.e. the dismissing manager) might well be found to include matters other than just Ms W's request for voluntary redundancy. In addition, Ms W alleged that the redundancy process was a sham, and the ET would therefore need to consider the fairness of the process, before making any final decision.

Learning points from this scenario

In this case, HC-One did not use a settlement agreement as part of the voluntary redundancy arrangement.  Had they done so, then clearly Ms W would have had a much more difficult task of bringing a claim.  Settlement agreements settle most statutory and contractual claims (like unfair dismissal and discrimination) and that is why they can be so useful where the business wants to avoid any risk of those claims. However, it is not always necessary to use settlement agreements for voluntary redundancy arrangements, but where (as in this case) there are outstanding grievances or complaints around the redundancy process generally, then you may want to consider making completion of a settlement agreement a conditional part of the voluntary redundancy exercise (particularly where the employee has over two years’ service).

Settlement agreements do usually come at a slightly additional cost to the business, and so where it is decided not to use those agreements, you should ensure that a fair redundancy process is adopted (making sure that there is some consultation with those selected) to ensure that the employee is given an opportunity to raise any specific queries, and any internal procedures (such as grievances) are progressed and resolved. In short, it may not pay to cut any procedural corners during the redundancy exercise if you choose not to use a settlement agreement.

For the most part, most businesses will be able to assess the risks of specific individuals, and for those that present a greater risk, use a settlement agreement to avoid any problems arising later.

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Phil works in partnership with HR and senior management teams by providing commercially driven employment advice, which is both pragmatic and outcome focused.

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