The current severe economic downturn makes for tough times for all. Redundancies are on many employers' minds and it's easy to trip up without careful planning and implementation. Last month, we looked at enhanced redundancy policies and age discrimination in our alert, Redundancy, discrimination and industrial meltdown. Here we look at pitfalls around suitable alternative employment.

As part of a redundancy exercise, the employer should consider whether there is alternative employment available for any redundant employee(s). You don't need to create alternative employment, but where suitable alternative posts exist they must be considered.

On the one hand, failing to offer such a post to a redundant employee could lead to an unfair dismissal. On the other, an employee who unreasonably refuses such a post could lose their entitlement to a redundancy payment.

Who has priority for alternative employment?

In Ralph Martindale and Company Limited v Harris, the company invited applications for a new post being created from the entire workforce, rather than only from "at risk" employees. The tribunal's view was that this approach did not reflect the current good industrial relations practice. Instead an employer should look at whether any at risk candidate is suitable for the role being created before opening the selection process up to other candidates. The Employment Appeal Tribunal (EAT) agreed.

This does not mean that an employer must appoint an at risk employee to a post for which they are not suitable. However, employers do need to ensure that the procedures they adopt to allocate any available alternative employment are as objective as possible, with consideration first of suitable at risk candidates. Employers should also consider whether an at risk employee could do the alternative job with reasonable retraining.

What about maternity leavers? At risk employees who are on maternity leave have special protection. They have an automatic right to be offered a vacancy which is suitable and appropriate. This right effectively trumps that of any other employee whose role is redundant at the same time.

Pregnant employees who have not yet started maternity leave by the time a redundancy situation arises are not entitled to this special protection. But, selecting a pregnant employee for redundancy is a fairly high-risk approach. If the reasons for selecting her in preference to other comparable employees are related to her pregnancy, the dismissal will be automatically unfair and unlawful sex discrimination. Both of those allegations can be difficult to defend. 

Reasonable refusal of suitable alternative employment?

An employee who unreasonably refuses an offer of suitable alternative employment made before termination or within four weeks thereafter loses their entitlement to a redundancy payment.

The factors a tribunal will take into account when assessing suitability and reasonableness include, job content and status, pay and benefits, hours, workplace and job prospects. Factors personal to the employee can also be considered such as domestic situation, health and housing. The elements of 'suitability' and 'reasonableness' are not considered in isolation so the job's 'suitability' can impact upon the question of 'reasonableness'.

In Commission for Healthcare Audit and Inspection v Ward, the employee had become disillusioned with the handling of the redundancy process. This was partly because of the employer's initial lack of clarity over, and refusal to discuss, the details of an alternative post on offer. She perceived the alternative post as a significant demotion. The tribunal found that the job was "on balance" suitable, but only marginally and that the employee had been reasonable in refusing it. The EAT upheld this approach. The tribunal was entitled to take into account the degree to which the alternative job was suitable, together with the way in which the redundancy process had been handled by the employer, which coloured the employee's perception.

So, the objective suitability of the post is not the only issue - an employee can refuse a suitable post provided they are acting reasonably. It is for the employer to establish that the employee's refusal is unreasonable and each individual case will turn on its particular circumstances.