What is a Redundancy?
Redundancy, also known as being made redundant, happens when an employee loses their job due to organizational restructuring, business closure, or ownership changes. This situation should only occur when an employee’s role becomes unnecessary or ceases to exist within the company, resulting in their departure without being replaced by another individual.
It is important to emphasize that redundancy should be viewed as a last resort for employers.
What is a genuine redundancy?
One common misconception among employers is regarding redundancy payments as a convenient way to eliminate underperforming employees without following the proper disciplinary process. However, this is completely incorrect. For a court to consider a redundancy as genuine, a clear “business case” supporting it must be presented. In other words, the employer needs to demonstrate that the redundancy is in the best interest of the business.
To determine the authenticity of a redundancy, a court would also assess whether the employer explored alternative methods to reduce costs, adapt employee roles, and generate revenue before making any redundancy decisions.
It is crucial to remember that any reasons for redundancy that involve the individual employee are not valid. Instead, all reasons should strictly pertain to the role itself, assuming it is functioning as expected and as outlined in the terms of employment. This reminder is essential because any actions, such as replacing the same role with a different person, would indicate an insincere redundancy.
Furthermore, it is essential to note that Section 8 of the Unfair Dismissals Act, 1977 places the burden of proof on the employer in a court of law. Therefore the employer must demonstrate through evidence that the redundancy was fair. In simpler terms, unless the employer can provide evidence to the contrary, the court will assume that the dismissal was unfair. This emphasizes the significance of ensuring a legitimate and well-documented basis for any redundancy decisions.
Been made redundant can genuinely happens under several circumstances, including:
- Business Failure: If the business is failing or becomes insolvent, redundancies may occur.
- Work Cessation: When a specific part of the business stops operating, resulting in job losses.
- Lack of Need: If an employee’s skills are no longer required due to changes in business operations.
- Reorganization: Redundancy may occur when someone else takes over the employee’s job after a company reorganization.
- Relocation: If the business or the job moves to another location, redundancies may happen.
- Takeover: When a business is acquired by another company, redundancies can result.
- Employer’s Death: If the employer was the sole owner and they pass away, it may lead to redundancies.
Was there Fairness within my Selection Procedure?
If you believe that you have not been treated fairly during the redundancy procedure, seeking legal assistance is advisable. However, as a starting points, let’s examine some initial points to assess the situation
- Determine if there are any specific guidelines or procedures outlined by the associated trade union for redundancy situations, and whether your employer is in compliance with them.
- If no specific union guidelines are in place, the company can adopt any one of the following fair redundancy selection procedures: Voluntary Redundancy, Last In First Out or an objective Selection Process.
a. Voluntary Redundancy: A Voluntary Redundancy involves offering employees the option to leave their job voluntarily in exchange for benefits and compensation.
Examples of unfair procedure in the voluntary redundancy process may include:
- Unfairly pressurizing specific employees to accept voluntary redundancy, making them feel coerced into the decision.
- Refusing to offer voluntary redundancy to an employee, while someone in the same role or position has been offered the option.
b. Last In, First Out (LIFO) : This method involves the employer selecting the newest employee for redundancy first.
A common example of unfair procedure in the LIFO process may include:
- Clear Exemption of ‘Favourites’: If an employer chooses to exempt a new employee from the redundancy process based on strategic reasons, such as exceptional performance or lower wages, despite them being eligible under the Last In, First Out (LIFO) method.
c. Selection Process: This process involves making a ‘business’ decision on which roles should be made redundant.
- Before a selection process begins there should be a comprehensive evaluation of each department to identify those at risk from the company directors.
- After this an “at risk” letter and initial meeting should be given to the affected parties. At this stage the at risk parties should be given the opportunity to propose internal solutions
- e.g. two staff will job-share or the department will expand roles to save money.
- There should also be subsequent meetings to keep affected parties informed and allow them to contribute input.
- he final decision should be transparent, logical and objective.
Examples of unfair procedure in the Selection Process would be
- Terminating someone’s employment for personal reasons, under the guise of redundancy and subsequently filling the same role with a new hire.
- During the hiring process, asking staff in the same role substantially different questions. Employers should generally adhere to a scripted set of questions, only deviating if prompted by the employee.
3. Understand the Criteria: Employers should ensure transparency by documenting every step of the process in writing. They should establish objective criteria to lead to a logical conclusion, maintaining fairness and objectivity throughout the selection process. If you are selected for redundancy you should be able to request a copy of the criteria and of your results.
Examples of unfair procedure within the criteria
- Lack of documented criteria in writing.
- Subjective criteria, such as rating employees’ skills out of 10, without any requirement for supporting evidence.
Reasons why Employers pursue a Non-Genuine Redundancy
In certain instances, employers may attempt to use redundancy which may in actuality be classified as an unfair dismissals. If you suspect that you have been unfairly dismissed, it is vital to thoroughly investigate the reasons and circumstances behind your redundancy. Identifying any unfair factors unrelated to your role during the decision-making process can significantly strengthen your case, but it is essential to gather concrete evidence to support your claims.
Some common examples include:
- Strained Relationship: If you had a difficult relationship with your employer or colleagues, it may raise doubts about the true motives behind your redundancy.
- Any evidence, such as harsh treatment or exclusion from business-related matters organized by your boss, can strengthen your case against the employer.
- Discrimination: Redundancy based on discriminatory factors, such as being made redundant shortly after announcing a pregnancy or intention to take maternity leave, would be considered unfair.
- Gathering evidence of the timing of redundancy discussions in relation to your announcement can be crucial in supporting your claim.
Does Deviation from Trade Union Guidelines and Procedures Make It Unfair Dismissal?
In short, the answer is no; however, it’s crucial for your employer to provide a valid justification.
Employers do have the option to deviate from trade union agreements, but this must be done with a high level of transparency and a valid reason. Early notification to employees about potential redundancies is essential, and any departure from trade union policies should be clearly communicated. Ideally, consulting with the trade union before making such decisions is recommended for a smoother process.
In essence, not complying with Trade Union guidelines does not automatically constitute unfair dismissal. However, it is a significant factor in the case, and it could be considered unfair if the employer cannot provide a valid justification for the non-compliance
Good example of this is the 2023 case, Castolin Eutectic and Bogdan Vasarheli [1]
- This case, heard by the Labour Court, involved a business facing reduced demand, leading to the redundancy of three machine operators. Although a genuine redundancy situation was acknowledged by the Court, the dismissal was deemed unfair due to issues with the selection process
- The company had an agreement with a trade union (SIPTU) to use the “last in, first out” (LIFO) method for selection, but they deviated from this agreement. The company argued that skill level should be the basis for the redundancy, justifying a selection process. However, the labor court disagreed, citing a lack of transparency and improper execution in their process.
- As a result, the dismissal was deemed unfair.
[1] Castolin Eutectic Ireland LTD (REPRESENTED BY IRISH BUSINESS AND EMPLOYERS’ CONFEDERATION) – AND – Bogdan Vasarheli (REPRESENTED BY SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION) ADJ-00035203 CA-00046375-001
What is statutory redundancy ?
Statutory redundancy refers to the minimum redundancy lump sum specified in ‘The Redundancy Payments Act of 1967′.
Calculating Statutory Redundancy
To calculate statutory redundancy, an eligible employee is entitled to receive two weeks’ normal weekly remuneration for each year of service, along with an additional bonus week. The calculation is based on the length of the employee’s reckonable service and their weekly remuneration, capped at €600 per week.
To qualify for a statutory redundancy payment, an employee must have worked continuously for 2 years (104 weeks).
It is important to note that certain circumstances are considered non-reckonable periods of service, and hence, they do not count towards redundancy pay calculations. These non-reckonable periods include;
- periods of being on strike
- time taken off work due to illness exceeding 26 consecutive weeks,
- time off work due to workplace injuries exceeding 52 weeks.
Statutory Redundancy and Tax
Regarding taxes, the statutory redundancy payment an individual receives is tax-exempt. However, it’s worth noting that this tax exemption may not apply to any non-statutory lump sums an individual may receive from their employer due to job loss. While these non-statutory lump sums might still be partially exempt from tax, they are not entirely tax-free like statutory redundancy payments.
