Tips in Employment Law: Dealing with Redundancies

3 Jun 2011

In the current economic climate many employers have found themselves seeking to reduce costs; leading, in many cases, to redundancies. Due to the drastic increase of redundancies and the courts’ increased scrutiny, it is now, more than ever, vitally important that employers are well versed in the laws governing redundancy.

1. When is there a redundancy situation?

Redundancy is defined by the Redundancy Payments Acts 1967-2007 (“the RP Acts”). Redundancy typically occurs when a business intends to close, or where an employer decides to reduce the number of employees, or has determined that the work which the employee performs is no longer required. Redundancy is a change that the employer is seeking to make within the business.

2. How does the employer select employees being made redundant?

Redundancy is generally impersonal having nothing to do with a specific employee. Therefore, the employer must be very careful in outlining an objective and transparent selection procedure. The selection procedure must be applied in a reasonable and fair manner.

Many employers will opt to use the “last-in first-out” method, as it tends to be objective. No matter which method formulated by the employer, it must always be as objective as possible, in terms of qualifications, skills and experience and must not be discriminatory.

3. What requirements must an employer meet when implementing redundancies?

An employer implementing redundancies must show all of the following:-

A genuine redundancy exists, i.e. that the dismissal falls within one of the five statutory definitions in the RP Acts. All possible alternatives were considered. That the selection process observed was fair. Its conduct was reasonable.

4. What payment is the employer required to make to the employee under the RP Acts?

An employee who has been employed for a period of 104 weeks (approximately 2 years) is generally entitled to receive the statutory redundancy payment. The payment is two weeks’ salary per year of service, plus an extra week (capped at€600 per week).

Employees employed for less than 2 years are not entitled to the statutory payment, but they are entitled to receive statutory or contractual notice and payment for holidays accrued.

An employer may pay a discretionary sum over the statutory payment; however, this is not required.

5. What is the notice requirement to employees under the RP Acts?

The RP Acts require a minimum of two weeks’ notice of termination of employment by reason of redundancy. However, an employee may have a longer period of notice under their contract or a longer statutory minimum period, depending on service.

Formal notice under the RP Acts must be given to employee by way of the RP50 Form. The employer must send the RP50 Form to the Minister for Enterprise, Trade and Employment, to claim the statutory 60% rebate of the statutory redundancy payment.

6. What is a collective redundancy?

A collective redundancy occurs if, during a 30 day period the number of redundancies implemented by an employer are as follows:-

Five in a company employing more than 20 and less than 50 employees; Ten in a company normally employing at least 50 but less than 100 employees; At least 10% of the employees in a company employing more than 100 but less than 300 employees; 30 or more employees in a company employing 300 or more employees.

In the event of a collective redundancy, an employer must notify the Minister for Enterprise, Trade and Employment in writing. There are also obligations to inform and consult with the employees’ representatives on matters, including, but not limited to, the reasons for the redundancies.

Specific legal advice should be taken in the instance of collective redundancies to ensure proper procedure is followed.

7. What recourse does an employee have who feels that they have been unfairly dismissed by reason of redundancy?

If an employee feels that he/she was unfairly dismissed he/she may bring an action for unfair dismissal to the Employment Appeals Tribunal (“the EAT”).

In an action for unfair dismissal, the burden of proof is on the employer to show that the criteria used for redundancy selection was reasonable, fair and objective.

8. What are some examples of EAT decisions in relation to redundancies?

In the past few years there have been a number of EAT determinations concerning redundancy dismissals.

Ponisi v JVC Europe Limited In Ponisi v JVC Europe Limited the EAT was not satisfied that a genuine redundancy existed and awarded the employee €161,420.

In Ponisi the employee was the General Manager and was made redundant when the company decided to restructure the business. As a part of the restructuring a new role of Sales Manager was created. The employee argued and the EAT agreed, that the new Sales Manager role was essentially the same role as the employee’s existing role of General Manager, but with a lower salary and status.

The EAT held that the employee’s position had not been made redundant and that the employee’s role still existed despite the change in title.

O’Sullivan v Blarney Golf Resort Limited In the case of O’Sullivan v Blarney Golf Resort Limited, the EAT found that the employers’ failure to apply objective, impersonal selection criteria when choosing an employee for redundancy meant that the dismissal was unfair.

In O’Sullivan, the employee took extended sick leave and returned to work on a part-time basis. The employer then decided that redundancies would have to be made and made the employee redundant. The employer failed to keep any evidence of its selection criteria and the EAT held that because there wasn’t any evidence that the employer had used fair or reasonable criteria in selecting the employee for redundancy, that the employee had been unfairly dismissed.

9. Summary

Employers involved in restructuring and redundancies must be are aware of all of the requirements of the RP Acts and must consider all of the legal issues surrounding redundancies and the potential ramifications of running afoul of the statutory requirements.

For further details in relation to redundancy and the governing laws please contact Compton Aylmer Solicitors at +1 234 2678.

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The Information in this document is provided subject to the disclaimer contained on the Compton Aylmer website. The material is provided for information purposes only and does not constitute legal or any other advice.