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31 July 2012

Reduction in Work is NOT a Redundancy

Our employment team considers a recent decision of the Employment Appeal Tribunal (EAT), in which it was held that a diminution in work alone did not result in a redundancy situation when there was no reduction in the number of employees required to carry out the work.

In this case (Welch v Taxi Owners Association (Grangemouth) Ltd), the claimant, a radio controller, brought a claim for constructive dismissal after her employer sought to impose a reduction in her hours.  She argued before the tribunal that her employer should have approached the issue as a redundancy situation.

The tribunal hearing her claim concluded that there was no redundancy situation, since the company’s requirements for radio controllers had neither ceased nor diminished at the relevant time.  It held that the claimant’s dismissal had been fair for ‘some other substantial reason’, namely the company’s genuine business need to reduce the hours of its radio controllers following a downturn in business.

The EAT has since upheld this decision, confirming that the claimant’s dismissal was not by reason of redundancy.  In accordance with long-established case law authority, it was satisfied that for a redundancy situation to arise there must a diminution or cessation in the employer’s requirement for employees (i.e. the number of employees) to carry out the work in question, rather than merely a diminution in the work itself.

Comment

The difficulty with this decision is that it appears to directly conflict with the recent EAT decision in Packman t/a Packman Lucas Associates v Fauchon.  In that case, a different division of the EAT concluded that an individual who was dismissed as a result of refusing to accept a significant reduction in hours was redundant, regardless of the fact that there was no reduction in the requirement for the number employees to carry out the work.

However, the present case was principally concerned with whether the claimant had been constructively dismissed, rather than the EAT considering in any detail the question of whether it could be interpreted as a redundancy situation.

In light of the apparent conflict between these two EAT decisions, an appeal to the Court of Appeal in either or both cases is desirable in order to clarify the position.  In the meantime, employers should exercise caution in seeking to make any significant reduction in hours and be prepared for affected employees claiming a redundancy payment.

A copy of the EAT judgment is available here