Furlough Before Redundancy? Are Employers Required To Furlough Employees Before Moving To Redundancy?
Key Contact: Claire Knowles
Author: Yannick Ramsamy
Two recent employment tribunal cases provide some interesting guidance regarding the approach employers should take in relation to redundancies whilst the Coronavirus Job Retention Scheme (CJRS) is in operation. We consider these cases in further detail below.
Mr. M Handley v Tatenhill Aviation Limited ET/2603087/2020
The respondent, Tatenhill Aviation Limited operated a small private airfield which provided flying lessons, aircraft hire, aircraft maintenance and related activities. The claimant, Mr. Handley was employed by the respondent as a full-time flying instructor.
The Respondent was a relatively small business, employing a total of 12 employees. Two of these employees were full-time flying instructors, the claimant and Mr. Wood.
In April 2020, the claimant was informed that the flying school was closing due to the Covid-19 pandemic and it was agreed that the claimant would be placed on furlough. The claimant signed a furlough agreement whereby it was agreed that the claimant would be furloughed for “a period of up to 3 weeks initially or until you can return to work as normal”.
The respondent then carried out a redundancy assessment, whereby it was determined that even when flight training resumed, there would be a reduced need for it given the inherent requirement for close contact between the instructor and student in a confined environment. As part of the redundancy assessment, it was considered that it may be necessary for both the claimant and Mr Wood to be made redundant. However as part of an internal redundancy assessment paper it was determined that Mr Wood had a number of additional skills compared to the claimant, which involved teaching aerobatics, working weekends, being a qualified examiner and being able to work as an aircraft engineer. This meant Mr Wood was still able to work in the respondent’s engineering facility which remained opened during the pandemic.
The claimant’s employment was terminated by reason of redundancy following a redundancy consultation process. The claimant registered an unfair dismissal claim. In his evidence, the claimant suggested the fact that he had been placed on furlough and the terms of his furlough agreement prevented him from being dismissed by reason of redundancy.
The tribunal determined that were two procedural flaws in the respondent’s redundancy process:
- the decision to make the claimant redundant was made prior to the redundancy consultation process. The redundancy assessment paper already concluded that the claimant would be selected for redundancy if the business had to take this step, before any consultation with the claimant took place; and
- Mr Wood was taken out of the redundancy selection pool before consultation with the claimant had concluded.
- The claimant’s redundancy appeal was deemed not to have been carried out in an appropriate manner. The appeal was held by the respondent’s director, Mr Shelton, who had also made the original decision to dismiss. Whilst the business was small, the tribunal determined that it could have arranged for someone else to hear the appeal, particularly given it was agreed that the appeal would be heard on papers only.
On this basis the claimant’s redundancy was deemed to be procedurally unfair.
Was there an obligation to keep the claimant on furlough for longer prior to redundancy?
Interestingly, the tribunal disagreed with the claimant’s submission that the terms of his furlough agreement prohibited the respondent from dismissing the claimant for redundancy. The key aspects of the tribunal’s judgment on this point were as follows:
- Whilst another employer may have taken a different approach and chosen to keep the claimant on furlough for a longer period, it cannot be said that it was unfair for the respondent not to do so. It is for an employer, not the employment tribunal to decide how to structure its business and whether to make redundancies.
- The tribunal accepted the respondent’s evidence that it needed to cut costs irrespective of the furlough scheme, and that it wanted to use the furlough scheme to pay some of the costs of making the redundancy.
- The nation was in unprecedented uncertainty during the pandemic, and it is not for the tribunal to step into the shoes of the employer and substitute its views for that taken by the employer at the time. Therefore, the decision to dismiss the claimant notwithstanding the existence of the furlough scheme did not, in itself, render the dismissal unfair.
Further, whilst it was determined that the claimant’s dismissal was procedurally unfair, the tribunal concluded that even if a procedurally fair redundancy procedure had been followed, this would not have resulted in a different outcome. In light of this, the tribunal stated that any compensatory award should be reduced by 100% in accordance with the principles set out in Polkey v AE Dayton Services, because there was a 100% chance of the claimant being made redundant if a fair procedure had been followed.
Mhindurwa v Lovingangels Care Ltd ET/3311636/2020
The claimant, Mrs Mhindurwa was employed by the respondent as a care assistant. From October 2018 the claimant was responsible for providing live-in care for an elderly woman. In February 2020, the elderly woman moved into a care home, meaning the claimant was no longer required to provide live-in care. Following consultation with the claimant, in July 2020 the respondent issued the claimant with notice of termination of her employment by reason of redundancy. This was on the basis that the respondent was no longer able to offer the claimant live-in care work.
The claimant registered an unfair dismissal claim. Part of her claim was based on the proposition that she should have been furloughed as opposed to dismissed.
The tribunal was sympathetic to the claimant’s furlough argument and concluded the following:
- The whole purpose of the furlough scheme was to avoid the lay-off of employees because of Covid-19.
- In July 2020, a reasonable employer would have considered whether the claimant should have been furloughed as opposed to being made redundant.
- The furlough scheme was envisaged for the type of situation the claimant was in i.e. a significant reduction in work arising from the Covid-19 pandemic.
- The respondent gave no consideration as to whether the respondent could be furloughed for a period of time to see if the situation regarding the reduction in live-in care work would change.
- The redundancy appeal process gave no consideration as to whether the claimant should be furloughed.
The tribunal therefore determined that the claimant’s dismissal was unfair and the case was listed for a remedy hearing.
What do these cases mean for employers?
Based on these tribunal decisions, it is arguably unclear to what extent furlough should be considered prior to making redundancies whilst the CJRS is in place. Ultimately, we would recommend that before making redundancies, employers: (a) ensure that they clearly consider whether furlough can be used as an alternative to redundancy; and (b) have in place a good rationale, should it decide that furlough is not a viable alternative. In Ms Mhindurwa’s case there appeared to be no consideration of these factors whatsoever, rendering her dismissal unfair. Whereas, in Mr Handey’s case, the tribunal was satisfied with the respondent’s reasoning not to continue using furlough as an option. Equally, the tribunal appeared to be heavily influenced by Mr Handey’s own admission that he himself would have retained Mr Wood (in a redundancy scenario), when determining that Mr Handey’s redundancy was inevitable notwithstanding the failings in procedure.
As these are first instance tribunal decisions they are not binding. As more judgments concerning redundancies made in the last 20 months or so are released, it will be interesting to see what approach is taken regarding the need to consider furlough as an alternative to redundancy.
If you have any questions in relation to redundancies, please feel free to contact the employment team.