In our recent webinar on Employer Restructuring we discussed the legal requirements and best practice on redundancies, including collective redundancies, in Ireland.
The economic consequences of the pandemic are hard hitting and many businesses across the country are faced with difficult decisions including a reduction in staff. Despite the many financial supports offered by the Government to affected businesses, a number of redundancies have already occurred and are likely to be an indication of a longer trend.
During our recent webinar, we discussed the potential alternatives to redundancies, what a typical redundancy process might look like and the additional obligations in a collective redundancy situation. The webinar provided useful best practice tips on how to manage the redundancy process and discussed common pitfalls for employers. Please let us know if you would like to listen to the recording and we will send you a copy.
We are seeing an increase in actual and contemplated redundancies in the current climate and we have been guiding some clients through this process. Before, during and after our webinar we received many questions. In this article, we address some of the most common questions and one or two we didn't have time to cover on the day.
Q. I heard that employers cannot make redundancies during the pandemic. Is this true?
No, this is not the case. There is no legal prohibition on redundancies during the pandemic.
There has been considerable government assistance including the Temporary Wage Subsidy Scheme (and now merging into the EWSS) that were designed to keep employees in employment and this has undoubtedly reduced the redundancies that might otherwise have occurred. Additionally, some employers have taken steps to avoid redundancies such as temporarily laying off employees, reducing their working hours or introducing pay cuts.
Normally, if an employee has been on lay-off or short time for 4 weeks or more, or 6 weeks in the previous 13 weeks, they can trigger a redundancy process and claim a statutory redundancy payment. However, the Emergency Measures in the Public Interest (COVID-19) Act (the "Act") has suspended this right until 17 September 2020 (and this may be extended). This was good news for employers and it meant that organisations were not going to face such claims from laid-off employees for statutory redundancy.
However, generally, the Act does not affect an employer's right to implement redundancies in the normal way during the pandemic. If an employer has considered alternative measures and still anticipates redundancies, they should follow the normal redundancy process.
Q. How long should an individual redundancy consultation process last?
This is fact-specific and will vary from situation to situation. Straightforward situations might take 2 or possibly 3 weeks or so but more complicated situations it may take longer. It will very much depend on the fact pattern. An employer should also be open to granting postponement requests from employees or requests for additional time Generally speaking, employers are faced with request for postponement or additional time (within reason of course).
In a previous Workplace Relations Commission decision, an employer was criticised for conducting a redundancy process over 1 week where the employee had 29 years' service. This serves as a reminder that, employers should not move too fast and should take their time in relation to the process.
Collective redundancies require a statutory 30 day notification and consultation period, which can often be conducted in a parallel manner.
Q. What factors should be taken into account when considering selection criteria?
A selection process may not necessarily arise in all individual or small group situations, but where it does arise, an employer must be able to justify why an employee was selected for redundancy. The selection criteria is particularly relevant where there are a number of similar employees who can perform the same role and an employer has to select a number of employees for redundancy from amongst this number. The selection criteria applied must be based on objective grounds.
In our experience, some of the more common selection criteria are as follows:
- One rather traditional selection basis is Last In, First Out ('LIFO'), which is based solely on the length of service with the organisation. Historically, it was a common basis for selection particularly where there are a large number of similar employees performing the same duties. More recently, selection criteria have often been more detailed but LIFO is still a legitimate basis in the right situation.
- Another common selection process is an interview or skills matrix process on a points based system. Employers might consider an employee's contribution to the business, their importance in the business, adaptability, qualifications, relationships with key clients and other similar criteria. The employee with the lowest score would then be in scope for redundancy. Some criteria may be difficult to objectively score so employers should avoid excessively subjective criteria.
Employers should avoid criteria that use attendance records as this could indirectly discriminate against an employee on disability grounds e.g. if they were on sick leave. We would also advise against using disciplinary records as an employee could argue that that is a double penalty - they have already been disciplined but now they are being disciplined again.
Discriminatory grounds, either directly or indirectly, should obviously also be avoided.
Best practice is to allow an employee to comment on proposed selection criteria in advance before scores are actually applied.
Q. Does an employee have the right to appeal a decision to make them redundant?
We are often asked by clients whether an employee has the right to an appeal in a redundancy situation.
It is not a strict statutory requirement. However, it is best practice in at least some cases and it can reduce the risk of a successful unfair dismissal claim. There is case law criticising employers for not offering and, particularly, for refusing an appeal.
Sometimes offering appeals might not be practical, particularly with large scale collective redundancies. However, it may be more relevant in an individual or small group redundancy situation, particularly if the process has been very contentious. In any event, if such an appeal is offered, it should be conducted by an impartial suitable manager who has not been involved in the redundancy process to date.
Q. Should an employee always be required to sign a Compromise Agreement?
If an employer is only making minimum termination payments i.e. notice period (if paid in lieu) and statutory redundancy, then there is no basis for asking an employee to sign a compromise agreement. The purpose of a compromise agreement is to waive and discharge an employee's rights to take legal action against the employer. Unless an employer is providing an enhanced payment or some other benefit in return as legal consideration, there is no enforceable legal basis to require employees to sign such an agreement.
In most cases, we recommend that an employer would consider the possibility of an enhanced payment as a correctly implemented compromise agreement would provide significant protection to the employer.
It is essential that an employee takes independent expert advice before signing any such agreement (and in any event should state in the agreement that they have taken such advice). Otherwise the compromise agreement might not be enforceable. The expert advisor is typically a lawyer but sometimes an experienced union official would also suffice.
Indeed, some employer's go further and offer to contribute towards an employee's legal fees for such advice.
Q. Must a voluntary redundancy involve payment above the minimum statutory redundancy payment?
The short answer is no, not necessarily. However, in circumstances where the redundancy is voluntary an employer might, as a matter of commercial reality, need to offer an additional payment as an incentive. It is also better to have a signed compromise agreement in such voluntary situations as the employer would otherwise have no process to rely on as a defence if litigation were subsequently to occur.
Q. If an employer is proposing a large number of voluntary redundancies, would collective redundancy legislation still apply?
Yes. Even where the redundancies are voluntary, they are still redundancies and regulated by the collective redundancies legislation.
A collective redundancy arises where a specified number of employees are made redundant in a 30 day period. When there is a collective redundancy, the legislation sets out certain mandatory and consultation requirements. These steps must be followed.
The legislation places prescriptive obligations on employers such as the election of employee representatives and providing such representatives with specified information 30 days in advance of the first notice of dismissals being issued. The employer must also consult with such employee representatives at least 30 days in advance of the first individual notice of dismissal. This consultation with employee reps is in addition to (and not instead of) individual consultations, although this can usually occur in parallel. Lastly, the employer must notify and provide similar information to the Minister for Employment Affairs and Social Protection as soon as possible and at least 30 days in advance of the redundancies taking place.
There are onerous criminal liabilities and fines for non-compliance with the legislation with possible fines on summary conviction of up to €250,000. Even if an employer could 'buy-off' the risk of an employee lodging a claim with the Workplace Relations Commission, an employer may still be criminally prosecuted and liable for fines for failing to comply with the legislation. In practice however, such prosecutions are rare.