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End of the furlough scheme – Redundancies on the horizon?

07 May 2020

The government’s furlough scheme (or coronavirus job retention scheme) has been very successful in avoiding a potential avalanche of redundancies over March-May 2020 as a result of the current lockdown. However, with the scheme likely to be wound down from July 2020 onwards, according to the chancellor, employers are having to consider other steps for dealing with a potentially long-term downturn in work.

What are the options?

Many employers are looking at reducing pay and/or altering hours of work, on a temporary or permanent basis. This is a minefield and must be navigated carefully to avoid claims for constructive dismissal/breach of contract.

Perhaps the most common solution is going to be redundancies. This is a complex area and the risks are considerable, so seeking expert employment law advice, as early as possible, is likely to save you stress and money in the long run in terms of avoiding claims.

What risks can we assist with?

Large scale redundancy exercises

In larger scale redundancy exercises, the employer must consult collectively with Union or other employee representatives with a view to reaching agreement. Failure to do so can lead to claims for a “protective award” of up to 3 months’ pay for each affected employee (in addition to any unfair dismissal compensation). Unions can and will seek to bring such actions where the employer has failed to properly comply. We can:

  • advise on whether collective consultation is triggered
  • guide you through the consultation process and, where required,
  • advise on holding an election for employee reps.

Avoiding claims of unfair dismissal

A redundancy dismissal is a dismissal like any other and can lead to claims of unfair dismissal and/or discrimination. For a “basic” unfair dismissal claim, compensation can be up to £88,000 or 52 weeks gross pay, whichever is lower. Therefore, it is vital to have a robust process, complying with legal requirements, as well as your own contract/policy. Key issues include:

  • ensuring the correct selection pools
  • fair and non-discriminatory selection criteria
  • individual consultation
  • looking for alterative employment.

You will want to consider: seeking volunteers, whether to pay enhanced termination payments (in return for a Settlement Agreement waiving all claims against the employer), a proper and robust scoring process, and how to keep the remaining staff engaged and committed to the business.

Avoiding claims for discriminatory redundancy dismissal

The redundancy process needs to take account of special cases such as employees with disabilities, or those on maternity leave, who have special rights. Where a redundancy dismissal is discriminatory, there is no cap on the compensation that can be awarded. The same applies if an employee is selected for redundancy due to having made whistleblowing disclosures.

Avoiding breach of contract claims

Breach of contract claims can arise if you fail to follow a contractual process, or perhaps fail to pay an enhanced termination payment that is contractually due (consider whether any such right has arisen by custom and practice). You will also need to address accrued holidays, any bonuses that are due, and comply with all other contractual arrangements

Quite apart from the potential compensation awarded by a court or tribunal, you do not want to spend this critical time bogged down in litigation and incurring legal costs defending claims, when your focus should be on guiding the business through these challenging circumstances.

BTO’s team of specialist employment lawyers can provide detailed advice to help you over the numerous hurdles and risks that arise when dealing with redundancy processes. We will be delighted to assist!

This update contains general information only and does not constitute legal or other professional advice.

Employment law

Caroline Carr, Partner: E: cac@bto.co.uk / T: 0141 225 5263
Laura Salmond, Partner: E: lis@bto.co.uk / T: 0141 225 5313
Jacqueline McCluskey, Partner: E: jmcc@bto.co.uk / T: 0131 222 2936
Douglas Strang, Senior Associate: E: dst@bto.co.uk / T: 0141 225 5271

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