Packman t/a Packman Lucas Associates v Fauchon UKEAT/0017/12
The Employment Appeal Tribunal (EAT) in Packman t/a Packman Lucas Associates v Fauchon UKEAT/0017/12 has confirmed that it is not necessary to have a reduction in the number of employees carrying out work of a particular kind in order to satisfy the statutory definition of redundancy under the Employment Rights Act 1996. The Act states "an employee is dismissed by reason of redundancy if their dismissal is wholly or mainly attributable to the fact that their employer's requirements for employees to carry out work of a particular kind have ceased or diminished or are expected to do so". Instead, reducing the amount of work to be done by the same number of employees can give rise to a redundancy situation.
The employer Packman Lucas Associates ("Packman") employed the Claimant as a bookkeeper and she was the only employee in that role. Following a downturn in work coupled with efficiencies realised by the introduction of a new software package, Packman considered that they no longer needed the Claimant to work her full contracted hours. Their attempts to agree a reduction with the Claimant failed, the Claimant refusing to agree to the reduction. The Claimant was dismissed. She subsequently bought various claims in connection with her dismissal including a claim for a statutory redundancy payment. Packman denied the Claimant was redundant and that she was entitled to a redundancy payment.
The Employment Tribunal judgment
The employment tribunal found that the Claimant had been dismissed by reason of redundancy and was entitled to a statutory redundancy payment. In reaching its decision, the tribunal declined to follow the authority contained in the previous unreported EAT case of Aylward and Others v Glamorgan Holiday Home Limited which was directly on the point in issue.
The EAT in Aylward had held that the statutory definition of redundancy is only satisfied when there is a reduction in the number of employees performing work of a particular and therefore there was no redundancy where, as in the present case, an employee was dismissed for refusing to accept a reduction in contractual hours and where the employer required the same number of employees to carry out the work.
Packman appealed against the tribunal's decision. It argued that Aylward was a binding authority on the point in issue to the effect that the Claimant had not been dismissed for redundancy, and should have been followed by the tribunal.
The EAT’s judgment
The appeal was dismissed. Departing from the previous authority, the EAT held that headcount does not need to be reduced in order to satisfy the statutory definition of redundancy. The Claimant was dismissed by reason of redundancy for refusing to accept reduced hours even though Packman still required her to do her job.
The decision was based on the following reasons:
- Aylward incorrectly focused on employees rather than on the amount of the work done and that, as such, wrongly decided that a reduction in headcount was required.
- Instead, there must be a focus on the employer's requirements for employees to carry out work of a particular kind.
- There should be a holistic approach to the statutory definition as the two variables, employees and work, are interlinked.
- An employee is dismissed by way of redundancy if the needs of the business change for fewer employees to do the same amount of work. Likewise, as in this case, if the amount of work available for the same number of employees is reduced then it also amounts to a redundancy situation.
This decision clarifies that any dismissal by reason of a downturn in work and consequent reduction in hours for a proportion of the workforce during which that work is performed can be a redundancy situation.
Furthermore the judgment reflects what is, in fact, common industrial practice by employers addressing redundancy situations which is to view the situation in the context of full time equivalents (FTE). So where the hours of two full time employees are reduced to 50 per cent but both continue working, there is deemed to be a reduction in headcount, measured by the FTE, even though the actual number of employees remains the same.