Employers may be concerned by a recent finding of the Employment Appeals Tribunal* that redundancies were not genuine where ongoing work was completed by a subcontractor. Whilst the case may on first reading appear to interfere with an employer's entitlement to use subcontractors rather than direct labour as a genuine basis for dismissal by reason of redundancies, in fact the decision serves as a reminder that the EAT is prepared to find that individual redundancies are unfair if it views the conduct (whether by act of omission) of the employer in relation to the dismissals as unreasonable.

In finding that eight plasterers who had been dismissed by reason of redundancy, were in fact unfairly dismissed, the EAT commented that the employer failed to take into account the claimants' length of service, failed to give them advance notice of the redundancies, and failed to adequately explore alternatives to redundancies, such as placing the claimants on short time or layoff, or giving due consideration to the implications of terminating a contract with its subcontractor.

The eight claimants were employed by the respondent as plasterers at various sites in the Dublin area. The claimants were employed directly by the Company with some having over twenty years of service. In 2006, the construction sector booming and as it was difficult to recruit direct labour subcontracting began in January 2007. At this time, the claimants were told that the work done by the subcontractor was not linked to the work done by the direct plasterers and that they would not be affected. The market subsequently slowed and four claimants were made redundant in January 2008 and a further four in March 2008. They were informed verbally on site with no prior warning. Statutory redundancy and notice was paid to them. The claimants were told that an apartment block where some of the men were working would not now be completed until 2009. They then discovered that the subcontractor was on site and completing the relevant apartment block. The company argued that it had to make the claimants redundant as it could not breach its contract with the subcontractor.

The EAT found that the claimants had been unfairly selected for dismissal and that on the evidence there was at least another twelve weeks work available. It made a total award of over €360,000.00 to the eight claimants under the Unfair Dismissals Acts.

Business Implications

The decision is instructive on the method of calculation of the awards of compensation in redundancy situations where procedures have not been followed correctly by the employer. Whilst the EAT has jurisdiction to award compensation of up to two years remuneration, based on actual loss of earnings, in this case, the EAT acknowledged that there would inevitably have been a redundancy situation and the awards comprised of twelve weeks pay less the statutory redundancy and minimum notice already paid (to which the claimants were in any event entitled). Whilst there has been an abundance of caselaw issued by the EAT in recent times, indicating its readiness to find that a redundancy process is unfair if an employer is not considered to have behaved fairly and reasonably in implementing redundancies, the level of compensation awarded in such cases appears to be lower than that awarded where unfair dismissals arise from non-redundancy situations.

*McGeehan and others v. Park Developments (UD 950/2008), EAT 13th March 2009