There is a crucial court of appeal pending from the Readman v Devon Primary Care case. The Court of Appeal decision is likely to impact of redundancy legislation, so Vanessa James, Partner and Head of Employment at SA Law, takes a closer look.
If the EAT upholds the decision of the EAT, the Court of Appeal will inevitably make it a real challenge for employers to restructure their businesses, meaning that opportunities for improved efficiencies will be very hard to achieve.
In broad terms where an employee declines a suitable alternative to redundancy then they will normally forfeit their right to a redundancy payment. The law applies a two step test as follows: Is the role a suitable alternative, when taken against the role that is to be made redundant? This test takes into account such things as the job content, hours, pay and location. If the answer to this is ‘yes’ then were the Trust employee’s reasons for refusing the role reasonable? In the instance of this case, the Claimant was employed as a nurse, working in the community. The NHS employer went through a restructure whereby the Claimant was “matched” into a nursing role based in the hospital. At the initial hearing, the Tribunal found that for a role to constitute a suitable alternative to redundancy, and therefore constitute suitable alternative employment, the position must be suitable in relation to the particular employee, bearing in mind skills, aptitude and experience. They found that as the position of “modern matron”, was in a small community hospital where the Claimant already had her office base and it was largely similar to her previous job, differing only in that it was not community based, it did constitute suitable alternative employment.
The Tribunal then had to consider whether the Claimant’s refusal of the role was reasonable. In their decision the Tribunal noted that; “the claimant rejected this offer without any considered attempt to explore what aspects, if any, of her current job would be lost, and what other duties might be required” and, in doing so, the Tribunal found that the refusal was not reasonable. This was especially as the Claimant had, at the time of the refusal, expressed a desire to emigrate to Canada. Therefore, the Claimant was not entitled to redundancy pay. The Claimant appealed and the Employment Appeals Tribunal decided to overturn the Tribunal’s decision. While they supported the finding that the first part of the test has been satisfied and that the role was a suitable alternative, they did not agree that the Claimant had been unreasonable in her refusal of the role. In the EAT’s view the Tribunal should have applied the correct test which was when considering whether the Claimant’s refusal of the hospital matron role was reasonable they should have considered it from her perspective.
NHS appeal to Court of Appeal
The NHS has appealed the decision which was due to be heard on 5th February and the decision is still pending. Where the decision goes is very difficult to predict, as this is the first time that this principle has been tested, even though the legislation concerned goes back to 1996. However, the implications of the decision are potentially very significant to the NHS, as well as other employers who have enhanced redundancy terms. Unlike many commercial employers, the NHS and Local Governments have terms where long servers can draw down on a number of possible benefits if they are made redundant. For example, the redundancy payment itself is normally calculated on an amount that exceeds the statutory cap, in some cases quite substantially. Also, for those made redundant after a certain age who are in the pension scheme there may be added benefit to them as they will be able to draw down early on their pension. Therefore, redundancy from such employers often presents a windfall to the employee which motivates them to seek redundancy over redeployment.
Making a nonsense of redeployment
If the Court of Appeal supports the EAT’s decision then employees will have almost free rein to determine whether they want a suitable alternative for reasons that are so subjective that it will make it almost impossible for the employer to argue confidently that the available job should be taken over redundancy. It seems that this outcome would not be consistent with the purpose of the legislation when originally drafted, which presumably was to preserve jobs and encourage redeployment. It may be that the Court of Appeal form that view.
If the Court of Appeal does not overturn the EAT’s decision then the NHS, in particular, will be almost paralysed from restructuring their services. The costs of letting long servers opt for redundancy will be prohibitive in itself – and that is before you consider that many skills in the NHS are already in short supply. This case involves nursing – which is often cited as an area where the NHS find it hard to source the right skills and experience to fill vacant posts yet the windfall of redundancy for a 20 year serving nurse in the NHS make it better for her to leave.
Also, by taking redundancy and taking early draw down on a pension, the NHS will have to pay an increased contribution to the pension fund – sometimes this can be at a significant cost. Even then the employee is still free to work elsewhere (subject to some caveats in the pension terms on maximum hours) and this is when formally redundant NHS staff appear back on the books as 'consultants'. The need for the skills is, after all still there.
The impact is the same in the local authority. At a time when we are going through a period of austerity measures, as well as extreme reports of negligent services (such as the Mid Staffordshire NHS Trust) and abuse of power and public money (such as the Serious Fraud Office) it means that management will be restricted from making essential changes if the Court of Appeal uphold the EAT’s decision. Impact on other employers
Although the impact is most obvious in the NHS and Local Government it will also impact on other businesses. There are private sector employers who took over government services as part of the outsourcing exercise popular in the last 15 or so years and some of those businesses still have staff with 'legacy' contracts for the NHS and Local Government staff who TUPE'd to them. Those staff will be just as expensive to make redundant.
Statutory redundancy pay can also be a problem for small businesses that would rather retain staff in the business in a slightly different role than pay up to £13,200 in redundancy pay. Therefore, by upholding the decision of the EAT, the Court of Appeal will inevitably make it a real challenge for employers to restructure their businesses, meaning that opportunities for improved efficiencies, and in the case of the NHS opportunities to deal with more serious failings, will be very hard to achieve.
