Unfair Dismissal
Redundancy

Redundancy occurs essentially when either the job disappears or the place of work disappears. To qualify as a potentially fair reason, the redundancy must fall within the statutory definition set out in s.139 ERA 1996:

‘(1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—

(a) the fact that his employer has ceased or intends to cease—

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business—

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer, have ceased or diminished or are expected to cease or diminish.’

A dismissal on the grounds that "the employee was redundant" is potentially fair – s.98(2)(c) ERA.  The statutory definition of redundancy is found in s.139(1) ERA and applies where the dismissal is "wholly or mainly attributable to" the employer either:

• ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (business closure);

• ceasing or intending to cease to carry on that business in the place where the employee was so employed (workplace closure); or

• having a reduced requirement for employees to carry out work of a particular kind or to carry out work of a particular kind at the place where the employee was employed to work (reduced requirement for employees).

Business or workplace closure

The test is whether the dismissal is caused by the employer ceasing operations at the place of work where the employee was employed, or the employer going out of business altogether. The employee's place of work for redundancy purposes is determined by the factual circumstances which existed before the dismissal, not merely by the terms of the employee's contract. This issue is particularly relevant when there is a mobility clause in the employment contract which states, for example, that the employee may be required to work "anywhere within reasonable daily travelling distance" of the existing premises. The Court of Appeal in High Table Ltd v Horst and others [1997] IRLR 513 (CA), held that:

"... if an employee has worked in only one location under their contract of employment for the purposes of the employer's business, it defies common sense to widen the extent of the place where he was so employed, merely because of the existence of a mobility clause.... It would be unfortunate if the law were to encourage the inclusion of mobility clauses in contracts of employment to defeat genuine redundancy claims."

Note that the existence of a mobility clause can still be taken into account, when determining the place of work where the employee has genuinely been required to work in more than one location. 

Reduced requirement for employees

The leading case on establishing whether an employee has been dismissed by reason of is Murray and another v Foyle Meats Ltd (Northern Ireland) [1999] IRLR 562. The House of Lords confirmed the following three stage test for applying s.139(1) ERA:

• Was the employee dismissed?

• Had the requirements of the business for employees to carry out work of a particular kind ceased or diminished?

• Was the dismissal of the employee caused wholly or mainly by that state of affairs?

Only if the answer at all three stages is "yes" will there be a redundancy dismissal.

Bumping

Bumping is the process of moving a potentially redundant employee (A) into another role, and dismissing the employee currently performing that role (B). This is still a redundancy dismissal, even if there is no actual or anticipated diminution in the requirements for employees to do B's work. The concept was explained succinctly in Gimber and Sons Ltd v Spurrett [1967] EWHC QB 2 and approved by the House of Lords in Murray v Foyle Meats:

"If there is a reduction in the requirement for employees in one section of an employer's business and an employee who becomes surplus or redundant is transferred to another section of that business, an employee who is displaced by the transfer of the first employee and is dismissed by reason of that displacement is dismissed by reason of redundancy."