Calls for Government to adopt German model of redundancy protection for pregnant employees

Baby Toy There has been a sizable amount of space afforded to pregnancy-related discrimination in the media this past year. In fact, that’s one of the reasons for this series of pregnancy-related blogs. As such, it is becoming increasingly difficult for employers to escape accusations of pregnancy-related discrimination when it arises. This being said, there are charitable organisations out there that believe that more needs to be done: one of these charities is Maternity Action.

During the past week, Maternity Action have released a report (named “Unfair Redundancies”) calling on the Government to strengthen anti-redundancy protection for pregnancy employees. The most eye-catching statistics quoted by the charity include that 1 in every twenty mothers are made redundant during their pregnancy, maternity leave or return to work and that 77% of pregnant women felt discriminated against during their period of pregnancy.

Before we continue, let’s just dial down into that first statistic for a moment.

Exclusion from voluntary redundancy of director aged over 50 was discriminatory

Mr Donkor was born in 1960 and started his employment with the Royal Bank of Scotland in 1978. He worked through the ranks and, from 2003, was employed as a regional director in retail banking. In 2012 there was a bank restructure which effectively meant that all existing regional directors would have to go through a selection exercise. Following a “desktop exercise” those not selected for interview would be given an options letter, allowing them to volunteer for redundancy. Those aged over 50 would also be given the option of early retirement.

Mr Donkor and three others were not offered an interview. He was one of two of the four over 50. However, when severance costs were calculated it was apparent that out of a total cost if £1.4m, £1.25m would be accounted for by the two employees aged over 50. In Mr Donkor’s case the overall cost would be £552,286.87, including a pension contribution of £460,275. The Bank reviewed the process and offered interviews to those who were initially successful. the result was that one of the four was successful. Mr Donkor was not. the value of Mr Donkor’s proposed settlement required approval at a higher level. While this process was ongoing the two other employees, both under 50, were given letters inviting them to apply for redundancy or redeployment. Mr Donkor was not sent such a letter.

In May 2012 an alternative role became available. He and Mr Batey (one of the employees under 50) were considered to be suitable candidates. Mr Donkor was notified accordingly and asked whether redundancy options were available. He was told that they were not since there was a suitable alternative role. He was offered and accepted the role before the selection exercise concerning him and Mr Batey was conducted. He remained in post until a further unrelated restructuring in 2013. In the meantime the bank changed its pension rules so that the minimum age at which volunteers for redundancy could apply for early redundancy was raised from 50 to 55. Within the 2013 restructure he was permitted to apply for voluntary redundancy and his employment terminated in September 2013.

He brought a claim of age discrimination on the basis that in the 2012 exercise he was not given the option of voluntary redundancy whereas comparable employees aged under 50 were. At the Employment Tribunal it was held that the employees aged under 50 were not appropriate comparators because they could not apply for voluntary early retirement. Alternatively, bearing in mind that Mr Donkor was not offered the option of voluntary early retirement so they were all treated in the same way. Further, even if there was less favourable treatment the reasons were the considerably higher cost and the likelihood that such a package would not be approved when there was suitable alternative employment. Accordingly, his claim failed. However, on appeal the Employment Appeal Tribunal disagreed with the Employment Tribunal and noted that the ET “lost its way when it came to this particular aspect of the direct age discrimination claim before it”.

Redundancy consultations and notifications – criminal sanctions

Most employers and HR staff with experience of dealing with redundancies are aware of the requirements for collective consultation. Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 requires employers, where 20 or more employees are proposed to be made redundant within a period of 90 days, to consult with the employees who are at risk of being made redundant for a minimum of 30 days. The period is extended to 45 days where 100 or more employees are affected. Failure to consult can result in protective awards of up to 90 days’ pay.

There is also a requirement to notify the Secretary of State of the proposed redundancies and this is done by using prescribed form HR1.

What is less well known is that failure to do so is a criminal offence and can result in prosecution and a fine. According to the Government’s website the fine may be up to £5000. However this is incorrect. Section 194 of the Act provides that an employer is liable on summary conviction to a fine not exceeding level 5 on the standard scale. Since 12 March 2015 such fines have been unlimited.

Further, pursuant to section 194(3):
Where an offence under this section committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to neglect on the part of, any director, manager, secretary or other similar officer of the body corporate, or any person purporting to act in any such capacity, he as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.
Accordingly, individuals can be prosecuted and, if convicted, face an unlimited fine as well as a criminal record.

This month, in a marked departure from the prior approach pursuant to which such prosecutions were virtually unheard of, prosecutions under the Act have been brought against the chief executive of Sports Direct and three former directors of City Link.

is it discriminatory not to offer a suitable vacancy to a woman selected for redundancy while on maternity leave?

The case of Wainwright v Sefton Borough Council was initially heard by Employment Judge Robinson in the Employment Tribunals in Liverpool in September 2013. His judgment was that Mrs Wainwight’s claims of automatic unfair dismissal, breach of regulation 10 of the Maternity and Paternal Leave Regulations 1999 (right to be offered suitable alternative jobs) and direct sex discrimination all succeeded.

In November 2010 the Authority was planning redundancies (as it is again now). The process continued into 2012/13. Mrs Wainwright had worked for the Authority since 2001, latterly as Head of Overview and Scrutiny. From July 2012 to July 2013 she was off work on her third period of maternity leave. As part of the restructure a new post was created – Democratic Services Manager. This combined Mrs Wainwright’s existing role with the post of Head of Member Services, held by  a Mr Steve Pierce. Both were placed at risk of redundancy and both were interviewed for the new post in December 2012. It was decided that Mr Pierce was the better candidate and he was offered the new job. As a result, in January 2013, Mrs Wainwright was given three months’ notice of redundancy, which took effect on 15 April 2013.

The new post was a suitable alternative vacancy but it appeared that there were no others at the time. The Council maintained that Mrs Wainwright was not entitled to special treatment under Regulation 10 until the decision was taken about who was the best candidate for the Democratic Services Manager role. However the Tribunal took the view that the right to be offered the vacancy arose when the redundancy situation affecting her job became known and was extinguished either when the appointment took effect or when the maternity leave ended. The Tribunal also took the view that the Regulation 10 right was absolute – where there is a suitable vacancy it has to be offered to the employee on maternity leave. Failure to do so made the resulting dismissal automatically unfair and was direct sex discrimination. Judge Robinson’s reasoning was based on him holding that Mrs Wainwright’s job was no longer available when she was put at risk in July 2012.

On appeal, there were two main grounds.

– Breach of Regulation 10 was not direct discrimination. Instead, Regulation requires more favourable treatment whereas there can be no direct discrimination unless there is unfavourable treatment.
– It was an error to conclude that Regulation 10 applied before the interviews for the Democratic Services Manager role.

can a business owner claim a redundancy payment?

The Employment Appeal Tribunal recently considered in the case of Secretary of State for Business Innovation & Skills v Knight whether or not a business owner can claim a redundancy payment.

Mrs Knight was managing director and owned 100% of the shares in Receptors Security Systems (UK) Limited. The Company was incorporated in 1991 and ceased trading, having become insolvent, in October 2011. Mrs Knight was employed under a contract providing for her to work 9.00 to 5.30 Monday to Friday for a salary of £20,000 plus discretionary bonuses. In practice she worked from 8.00 to 7.00 and was paid £1000 “take home” per month. However, as the Company faced financial difficulties she took no pay at all in the last two years of trading. In effect she forfeited her salary in order to pay other employees and suppliers.

At an Employment Tribunal it was held that she was an employee and therefore entitled to a redundancy payment from the National Insurance Fund. The Secretary of State appealed on the grounds that:

Judging her to be an employee was based on a perverse conclusion;
Having forfeited her pay she had changed her position so there was no mutuality of obligations sufficient to establish a continuing contract of employment; and
The Tribunal should have considered her position at the date of the insolvency, not what might have been the position earlier.

The Secretary failed on all grounds. There was a sequence of cases from which it was clearly established that, subject to the particular facts, a controlling shareholder can still be an employee. This applies equally to a claim against the Secretary of State for payment from public funds.

Was there a subsisting contract of employment at the date of insolvency? Yes. The Company would have been obliged to pay a redundancy payment if it could have done so because, quite simply, she was an employee during the time when she drew no salary and she was therefore an employee at the time when the claimed obligation arose. There was no agreed variation or discharge of the contract. As for use of the word “forfeited” this did not mean that she had agreed not to take any salary at all or that this had brought her employment to an end.

a reasonable alternative to redundancy?

In redundancy situations employers sometimes offer “suitable alternative employment” as a means of avoiding redundancy. Suitability depends on how similar the work is, the terms of the job being offered, the skills, abilities and circumstances of the person being offered the job and the pay, status, hours and location. If a reasonable offer is unreasonably refused, the individual concerned may lose the right to a statutory redundancy payment.
When the writing was on the wall for Tavistock and Summerhill School as a result of falling rolls, the governors decided there was no option but to close the school and gave notice of redundancy to the staff in March 2011 – without much regard to collective consultation, although the Head and Deputy Head were involved in management discussions about it. The parents stepped in and mounted a rescue plan, and offered most of the staff new employment just before the end of the summer term, when their employment was due to end. No such offer was made to the Head, and no explanation was ever given for this. The teachers turned the offer down, having found other employment. Were they reasonable in doing so? Both the Employment Tribunal and the Employment Appeal Tribunal agreed that they were. The offer came very late in the day after all had made alternative arrangements either by way of alternative employment or, in one case, planned retirement. Accordingly all were entitled to redundancy payments.
A number of further issues were considered in the case, including the obligation to carry out collective consultation. It was found that a protective award was due to all of the employees, including those on the management team who had been aware of what was being discussed:
A clear distinction must be drawn between the discussions with a view to saving the school at a high management level and consultation with employees about job losses or possible job losses in the future.

reasonable adjustments for absent employees in the event of redundancy

In McCarthy v Jaguar Cars Ltd the Employment Appeal Tribunal considered, and upheld, an Employment Tribunal decision that where a disabled person had been selected for redundancy although the selection criterion relating to attendance amounted to a discriminatory provision, criterion or practice, the employer had made a reasonable adjustment by scoring the employee on the period before he became disabled.
Mr McCarthy was a process engineering manager who became ill with depression and went off sick in 2007. There was no dispute that his illness was a disability. He was still absent from work when a redundancy situation arose in 2009. He fell within the pool for selection, scored poorly and was made redundant. He appealed successfully and was re-scored, this time based purely on his attendance and performance prior to his illness when he was at work and performing well. The result of the re-mark was virtually the same.
The Employment Tribunal found that the re-mark was an appropriate way forward and “expunged any disadvantage” to Mr McCarthy and the Employment Appeal Tribunal upheld the decision.
It is quite plain that the Tribunal were accepting the concession made, that the application of the criterion would ordinarily lead to a substantial disadvantage to the Claimant, and they were satisfied, for the reasons we have just reproduced, why it was that the steps taken by the employer removed the relevant disadvantage. Against that background, we reject the proposition that it was necessary to deal, for example, with Mr McCarthy’s contention that there were different ways of making reasonable adjustments (for example by averaging his points). The Tribunal found that what was done was the making of reasonable adjustments and that they eliminated the disadvantage.
Overlaps between rights and procedures such as those highlighted in this case can often seem daunting for employers, so much so that I can think of some employers who have abandoned proposed dismissals for fear of procedural errors. Another good example is the difficult co-existence of protection from disability discrimination and dismissal on the ground of ill-health incapacity. In fact, as long as key principles are adhered to, employers can proceed in relative safety. For example, dismissal for incapacity will generally be fair as long as it is established (almost always supported by professional medical evidence) that the employee will be unfit to return to work for the foreseeable future.

unreasonable refusal of alternatives to redundancy

In January 2012 I reported the decision of the Employment Appeal Tribunal in the case of Readman v Devon PCT concerning whether or not it was reasonable for a specific employee to reject alternatives to redundancy which would have been accepted by a reasonable employee. The EAT decided that Mrs Readman was entitled to reject the offers, thereby overturning the decision of the Employment Tribunal. I pointed out at the time that when, according to the EAT, the Tribunal got its analysis fundamentally wrong, it demonstrated just how hard it is for employers to get things right when trying to apply fair procedures
That observation has been well and truly reinforced by the decision of the Court of Appeal – Devon Primary Care Trust v Readman. The Court considered two issues – whether an Employment Tribunal had been wrong to decide that a nurse had lost the right to a redundancy payment by unreasonably refusing an offer of suitable alternative employment, and how that question should be addressed. After 30-odd years mainly spent working in the community the employee was working as a modern matron. On facing redundancy, she was offered three options – two jobs at a lower grade (which were not suitable) and a job at the same grade, but working in a small hospital.
Although it had correctly looked at the question from the employee’s subjective point of view, the Tribunal had got it wrong, by failing to consider all the relevant facts properly including the employee’s preference for working in the community rather than a hospital, and the possibility that the reason for refusal was because she wanted to emigrate to Canada.
However, the Employment Appeal Tribunal had also got it wrong.

redundancy and “keeping it real”

You might think that Contract Bottling Ltd v Cave is just an example of the phenomenon of "bumping", and is based on somewhat unusual facts which are unlikely to be replicated, but it is noteworthy as an illustration of how not to go about selecting employees for redundancy. When a new owner rescued Contract Bottling from financial dire straits, he set about reducing excessive costs. He hired an outside consultant to do this. It was clear that the office was overstaffed. The decision was made to put all ten office based employees into the same pool for selection from accounts manager to stock controllers via the sales team. The thinking was that they would all be selected according to the same matrix, and if those that remained after that had the wrong skills, well, then they would be retrained. As odd as it was, there was nothing wrong with this decision. However, the tribunal had a lot of compelling criticisms of how the process was approached:

– A redundancy selection matrix already in place and in the staff handbook was abandoned;
– The criteria used were, without exception, subjective;
– The assessment was carried out by someone who knew nothing of the employees;
– The company either could not, or would not, explain how the scoring had been done;
– No meaningful consultation took place; and
– The same person did the initial scoring and dealt with appeals against selection.

better redundancy deals for older workers?

In Lockwood -v- Department of Work and Pensions and The Cabinet Office, the Employment Appeal Tribunal (EAT) has endorsed the legitimacy of a voluntary redundancy scheme which provided enhanced benefits for older employees.
The claimant applied for redundancy at the age of 26, having worked at the DWP since she was 18. She was entitled to a redundancy payment under the Civil Service Compensation Scheme of nearly £11,000. However, if she had been over 35, she would have been entitled to over £17,000 more. She made a claim of direct age discrimination, but failed in the Employment Tribunal.
The EAT upheld the decision. There were material differences between the two groups – older workers would find it more difficult to find new employment and would have heavier family financial commitments than younger workers. The EAT also agreed that the different payments were justified, in that the different levels of payment were a proportionate means of achieving the legitimate aim of providing workers with a financial cushion to tide them over until they find another job – which would be harder for older workers.
The decision provides important clarification concerning this difficult issue which has troubled many employers since age discrimination legislation was implemented in 2006. It is in line with calculations for redundancy payments and basic awards for unfair dismissal which take into account both an employee’s length of service and age. When the Regulations first came into force many employers took steps to remove all of their own procedures that might result in an employee suffering an advantage or disadvantage merely because of his or her age. However, now that we have a few years’ worth of decisions concerning how protection from age discrimination works in practice, it has become clear that Tribunals will readily find that making different provisions according to the ages of employees is permissible, as long as there is a credible rationale for the approach taken.