Source: section 135, ERA: employee has basic right to redundancy payment
Those excluded from payments:
· Independent contractors
· Employment outside Great Britain
· Less than two years continuous employment
· Offer of suitable alternative employment
· Misconduct
· Offer of re-engagement or alternative employment.
· Former registered dock workers and share fishermen
· Crown servants, members of the armed forces or police services
· Apprentices who are not employees at the end of their training
· A domestic servant who is a member of the employer’s immediate family.
Payment Calculation
Source: section 162, ERA
Information required:
· Age of employee
· Length of continuous employment
· Amount of gross weekly pay
Working backwards, for each year in which employee was aged between 41 and 64: one and a half week’s pay.
For each year aged between 22 and 41: one week’s pay.
For each year from start of work to age 22: half a week’s pay.
Notes: 20 years maximum calculation
Maximum gross weekly pay: £538
Employment before 18 not counted.
Current maximum redundancy payment: £16,140
Weekly pay is the average earned per week over the 12 weeks before redundancy notice is required.
Note: where an employer becomes insolvent, statutory redundancy pay can be claimed from the government (National Insurance Fund). This also applies where the employer refuses to pay and the worker has taken all reasonable steps to obtain payment.
Case Examples:
Ugradar v Lancashire Care NHS Foundation Trust UKEAT/0301/18/BA
U was dismissed for redundancy by L. She brought claims for contractual and statutory redundancy payments totalling £44,000. L argued that she had been unreasonably refused alternative employment. The ET found that the alternative employment had been unsuitable. Its jurisdiction over contractual claims was limited to £25,000 and it did not award a statutory redundancy payment on the basis that the NHS contractual redundancy scheme stated that it was an enhancement to a statutory payment and the statutory payment was offset against any contractual payment. U appealed to the EAT.
The appeal was allowed. U met the conditions for a statutory redundancy payment, but none had been made. U was entitled to a statutory and a contractual payment.
Kelly v Land Rover (2012) Birmingham ET
K was employed by LR as a manager. He had been an employee for 24 years. He suffered from physical disabilities and neurofibromatosis. During a period of sickness absence LR considered redundancies. K was not informed of this. He was dismissed for redundancy.
The ET found the following:
1. The failure to allow K to engage with the redundancy process amounted to a failure to make reasonable adjustments.
2. LR could have extended the assessment period to allow for K’s absence.
Quantum: LR argued that K had failed to fully mitigate his loss. The tribunal agreed, stating that he had not availed himself of all the potential opportunities open to him.
Actual loss of earnings: £65,000
Loss of benefits: company car, healthcare: £20,000
Pension loss: simplified approach: £47,000
Hazel v New Eltham Conservative Club [2013] All ER (D) 318
The claimants were husband and wife who were made redundant. They complained of unfair dismissal. The complaint was upheld on the ground that there was no redundancy situation. The husband would have retired in 4 years’ time. Compensation was awarded until his retirement date on the basis that he would have worked until retirement. No consideration was given to reflect the chance that the claimants could have been properly dismissed at some time before retirement. The employer appealed.
The appeal was allowed.
There was sufficient evidence for the employment tribunal to have considered the chance that the claimants might have been properly dismissed at some time before retirement. The task of the tribunal was to assess the loss flowing from the dismissal, using its common sense.
Digital Equipment Co v Clements (1996)
C was made redundant in 1995 and received a severance payment of £20,685. The IT found that he had been unfairly dismissed. If a fair procedure had been used, there was a 50% chance that he would not have been dismissed. The IT assessed the total compensatory award at £43,136. It then deducted severance pay, leaving £22,451. This sum was halved to reflect the finding of a 50% chance of non-dismissal. It then applied the statutory maximum, as it then stood, to award £11,000.
The employer appealed on the basis that the IT had been wrong to deduct the severance payment before applying the 50% reduction.
Decision:
The contractual severance payment should be deducted from the compensatory award AFTER the award was reduced to reflect the chance that the employee would have been dismissed if the employer had acted fairly.
An award of £837 was substituted.
McDowell v BAE Systems (Operations) Ltd (2016) Eq Opp Rev 270:37, Bristol ET
M was employed by BAE as a design lead. In January 2015 he was made redundant at the age of 65. The employer’s enhanced redundancy scheme was capped at age 65. M received only his statutory redundancy pay and no enhancement. He complained of direct age discrimination. The employer argued that it had legitimate aims in imposing the capping, in that finite funds available for redundancy payments were allocated across the workforce in a fair and equitable manner.
The claim succeeded. The cap itself was not a legitimate aim because it was in itself simply linked to age. Too much of the employer’s argument was based on generalisations. It had not presented any figures to explain what finite funds were available to it.
BAE Systems (Operations) Ltd v McDowell UKEAT/0318/16/RN
BAE operated a redundancy scheme which included a cap so that payments were not available to employees aged over 65 who had immediate entitlement to an occupational pension. The cap was applied to M who complained of direct age discrimination. BAE accepted that the cap was discriminatory on grounds of age but argue that it was a proportionate means of achieving the legitimate aims of its severance framework. The ET rejected this argument and did not accept that BAE had shown that this was a windfall case. Because there was no default retirement age, it could not be assumed that redundancy payments to employees in M’s position would amount to a windfall. BAE appealed to the EAT.
The appeal was allowed in part. The ET had been correct to conclude that this was not a windfall case. The ET had failed to show a holistic approach to its assessment of the means adopted to achieve the various legitimate aims.
Stevenson v Teesside Bridge and Engineering [1971] 1 All ER 296, DC: an employee may be refused redundancy payment where he declines an offer to work away from home (steel erector).
Managers (Holborn) Ltd v Hohne [1977] IRLR 230, EAT: unilateral reduction in pay and status held to amount to constructive dismissal with entitlement to redundancy payment.
British Coal Corporation v Cheesbrough and Secretary of State for Employment [1990] IRLR 148, HL: average rate of remuneration to be calculated by reference to all hours worked, including overtime, and any remuneration received.
S & U Stores v Wilkes [1974] 3 All ER 401, NIRC: reimbursed expenses not included in average weekly rate of remuneration.
Secretary of State for Employment v Crane [1988] IRLR 238, EAT: circumstances in which employee agreed to work for no pay are included in interpretation of the words “no remuneration was payable”.
Simmons v Hoover Ltd [1976] IRLR 266, EAT: an employee serving out notice of redundancy was dismissed for taking part in strike. Held, accrued right to redundancy payment survives second dismissal.
Pickwell v Lincolnshire County Council [1993] ICR 87, EAT: employee worked at a school which had been funded by local authority, but which became grant-maintained. Held, continuous employment for purpose of redundancy pay.
British Coal Corporation v Cheesbrough and Secretary of State for Employment [1990] IRLR 148, HL: average rate of remuneration to be calculated by reference to all hours worked, including overtime, and any remuneration received.
S & U Stores v Wilkes [1974] 3 All ER 401, NIRC: reimbursed expenses not included in average weekly rate of remuneration.
Secretary of State for Employment v Crane [1988] IRLR 238, EAT: circumstances in which employee agreed to work for no pay are included in interpretation of the words “no remuneration was payable”.
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