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LWM14 Employment Law

Employment Law

6.1.1 Policy behind legislation


With recent high levels of unemployment, it is quite an eye-opener for many students to learn that the main reason for passing the Redundancy Payments Act 1965 was to support management interests by promoting labour mobility and thus reducing resistance to technical change. Fryer in an article in the Industrial Law Journal (1973) Vol. 2 p.1 considers the "six myths of the 1965 Act" which he concludes are:


• provides an element of job security


• provides job property rights


• restricts managerial discretion


• compensates workers for loss of their job


• acts as a disincentive to find alternative work


• protects in the event of job loss.


6.1.2 The effect of the Act


There is considerable evidence that as an economic policy the Act has failed and the only mobility it has encouraged is that out of the labour market. Protection of managerial power can be seen in the interpretation of the statutory provisions by the courts so that the main effect of the Act has been to make it easier for employers to dismiss employees. The legislation has not made much of an impact on collective bargaining practices. The unfair dismissal provisions have resulted in policies of redundancy selection (usually LIFO) and often employers do pay more than is statutorily required.


6.1.3 What is redundancy?


Redundancy is defined by s139 ERA and covers two situations:


1. The employer has ceased, or intends to cease to carry on the business at all, or in the place where the employee was employed.


2. Requirements of the business for the employee to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish, or requirements have similarly changed in relation to the place where the employee was employed.


The definition is factual i.e. the law is not concerned with the reasons which led to the redundancy situation. It is also exhaustive so that, for example, dismissals due to original over-recruitment do not come within it.


In O`Hare v Rotaprint [1980] IRLR 47 the employer had to dismiss employees to reduce overmanning because his hopes of expanding his business were too optimistic. It was held this was not redundancy because "requirements had not ceased or diminished"- they had never existed!


In Johnson v Peabody Trust  [1996] IRLR 387 there was a flexibility clause in J’s contract and J therefore argued he was not redundant. The EAT disagreed. There was  a diminution in the employer’s requirements for employees to carry out roofing work and therefore J was redundant.


In High Table Ltd v Horst  and Others [1997] Times 9  July 1997 the Court of Appeal decided that for redundancy purposes an employee’s place of work was not to be decided solely by reference to the contract of employment regardless of where the employee actually worked. The employees here were dismissed for redundancy reasons but argued that as their contracts contained mobility clauses and there were feasibly other places that they could have been asked to work, they were not dismissed for reasons of redundancy

6.1.4 Definition of redundancy as interpreted by the courts


A decision in 1997 of the EAT effectively called into question a long line of cases interpreting the statutory definition of redundancy and pronounced them to be wrong! The statutory definition (s139(1) ERA) states that for there to be a dismissal due to redundancy the requirements of [a] business....for employees to carry  out work of a particular kind...have ceased or diminished...There have been several cases indicating that the contractual duties of the employee must be taken into account - if a clerical worker spent most of her time typing but her duties included filing, she was not redundant if her employer required her in future to spend most of her time filing. Another approach (the functional approach) is to concentrate on what the employee actually did. 

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