Is a headcount reduction required for a redundancy situation to exist?
Redundancy is one of the trickiest situations to deal with and it produces a vast body of case law. This is highlighted by a recent case that has resulted in there being a conflict of EAT authority regarding whether a headcount reduction is needed to satisfy the definition of redundancy. The EAT in Packman t/a Packman Lucas Associates v Fauchon said no you don’t, while the answer also from the EAT in an pre-existing case was yes you do.
As a recap, there are broadly 3 scenarios that give rise to a redundancy situation:
- Closing of a business
- Closing of the workplace where the employees work
- The employer’s need for the employees to do the work is diminishing
If an employee is dismissed as a result of being in one of the above situations, then the reason for their dismissal will be redundancy.
But what about where there is no headcount reduction? In the two cases we have mentioned, the situation was broadly the same (although they were positioned differently). In Packman the employer implemented a new computerised system which meant that whilst it still needed the employee, it did not need her to work the same number of hours. When the employee refused to accept reduced hours, she was dismissed. The EAT said that this was still a redundancy situation despite the fact that the employer was not trying to reduce headcount.
The Packman case seems logical to us: the employer no longer had a need for a full time employee to do the work she had been doing. That role was redundant, and the alternative offered was a part time role – i.e. a different role. So whilst the headcount remained the same, the nature of the role needed was different.
- It is not ideal that there is no definitive answer so be careful when looking at reducing hours where the ultimate outcome might result in dismissal. You might think this is a contractual change, but in fact it could be a redundancy which means that the way you handled it will come under the spotlight. There will also be the obligation to pay a redundancy payment.
Created 31st July 2012