In the case of Packman v Fauchon, the Employment Appeal Tribunal (EAT) has confirmed that a necessary reduction in headcount is not a prerequisite for a redundancy situation, as long as the employee is dismissed because the employer’s requirement for particular work to be carried out has diminished, or ceased to exist.
Fauchon was employed as a book-keeper. Due to the introduction of new technology, and a decrease in business, the need for her job was diminished. The Respondent suggested a substantial decrease in Fauchon’s weekly hours, but ultimately dismissed her when she refused to accept reduced hours. Fauchon subsequently brought proceedings against the Respondent for a statutory redundancy payment.
The Employment Tribunal held that Fauchon had been dismissed on redundancy grounds, and so was entitled to a statutory redundancy payment. In doing so they expressly rejected the decision of the EAT in Aylward v Glamorgan Holiday Homes Ltd, which previously held that a reduction in headcount was necessary for a redundancy situation, but which had been criticised by many legal commentators as being incorrect. The Respondent appealed this decision, holding that Aylward was the binding authority on the matter and should have been followed by the Tribunal.
The EAT has dismissed the appeal, rejecting the Aylward decision, and confirming that a reduction in headcount is not required for a redundancy situation. Instead the test is whether there has been a reduction in the need for employees to carry out work of a particular kind, the focus being on a reduction in the work as opposed to a reduction in headcount. Therefore, if an employer concludes that his business has less work for the same number of employees then a dismissal of an employee for that reason will be a redundancy dismissal. However, the EAT did note that the Tribunal should have followed the binding authority of Aylward whilst making its disagreements with it clear.
Impact for employers
- This case provides welcome clarification that there does not need to be a reduction in headcount for a redundancy situation to arise. If there is a reduction in a particular type of work carried out by a workforce, but no necessary reduction in headcount, then a redundancy situation may be held to exist.
- The EAT in this case noted that this is in accordance with the industry approach of working on the basis of a “full-time equivalent” (FTE) when dealing with working hours and numbers of employees. Taking this approach, a reduction in hours can more easily be translated into a reduction in headcount in terms of the FTE.
- Employers should however always bear in mind that a reduction in hours will not necessarily always lead to a redundancy situation, as questions of redundancy remain dependant on the specific facts of each case.