Redundancy and Furlough

25 Aug 2021

According to government statistics, the number of employees on furlough is falling with just under 2 million employees on furlough compared to 2.4 million employees at the end of May. The furlough scheme finishes at the end of September but with the decrease in the amount of the Government furlough grant that employers can claim, some employers are  considering making redundancies now in order to reduce overheads.  

Two recently reported Employment Tribunal decisions provide assistance as to how employees should approach such redundancies.  

The Relevant Law

Employees with more than two years’ service can bring claims for unfair dismissal.  Termination on the grounds of redundancy is a complete defence to any such unfair dismissal claim.  However, the redundancy must be genuine and the employer will need to show that that position no longer exists.  Also. the procedure adopted by the employer must be fair and adequate.  This involves a formal consultation with the employee so that:-
  • If there is a selection pool, selection criteria need to be established.
  • The employer provides the employee in writing with the reasons why the employee is at risk of redundancy and requests that they attend a consultation meeting.
  • At that meeting, the employee is given an opportunity to state their views before the decision is made.
  • The employer discusses whether there is any suitable alternative vacancy which can be offered to the employee so that redundancy can be avoided.
  • If the decision is to make the employee redundant, offer the employee the right of appeal and ensure that the appeal process is genuine.
During the furlough scheme, an employee could ask why the decision was being taken now to terminate their employment and that it would be better if they were placed on furlough.  In this way, the employee would still receive a salary and the employer would receive the furlough grant to offset some of the salary costs.  It could also be the case that market conditions would improve meaning that the redundancy was no longer required.

The Employment Tribunal Decisions

In one of the cases, Mrs Mhindurwa brought a claim against her former employer who had initiated a redundancy process in July 2020 but had refused to consider putting Mrs Mhindurwa on furlough. Also, the appeal process offered to her was flawed. The Employment Tribunal accepted that there was a genuine redundancy situation since the work that Mrs Mhindurwa was employed to do had diminished.  However, the whole purpose of the furlough scheme had been to avoid redundancies and the Tribunal was therefore of the opinion that a reasonable employer would have considered furlough as an alternative to redundancy.  When this point was put to the employer at the Tribunal, it could not explain why furlough had not been considered suitable.  The Tribunal therefore decided that Mrs Mhindurwa’s dismissal was unfair because there was not a genuine redundancy. 

The Judge said in the decision “I am of the view that the failure to give consideration to the possibility of furlough and the failure to offer the claimant a proper appeal render the claimant’s dismissal unfair.”
 
In the second case, Mr Handley was furloughed by his employer in April 2020, was made redundant in August 2020 and brought a claim for unfair dismissal.  He argued that the furlough agreement with the employer prevented his redundancy but the Employment Tribunal disagreed.  It accepted that the employer had needed to cut costs notwithstanding the furlough scheme and that it had wanted to use the furlough grant to pay some of the costs of redundancy.  It might well have been the case that another employer may have chosen to leave Mr Handley on furlough for longer but the fact that the employer had decided against this did not make the dismissal unfair.

The Judge said “The decision to dismiss notwithstanding the existence of the furlough scheme does not, in my view, render the dismissal unfair.” 

Conclusion

Because these two cases were decided at the Employment Tribunal level, their decisions are not binding. One can, however, deduce from them that Tribunals expect employers to have considered furlough when contemplating redundancies.  Making an employee redundant whilst the furlough scheme exists is not necessarily unfair but it would be unfair if an employer cannot provide a good explanation as to why furlough was rejected or not even considered. Employers should therefore consider the furlough scheme in the redundancy consultation process. 

If employers have made redundancies during the last three months and have not considered the furlough scheme during the redundancy process, they could receive an unfair dismissal claim.

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