Redundancy and Your Rights , October 2008

Question: I have been working as a van driver in a small company with less than 10 employees for the last seven years. The business hasn’t been going well of late and there have been rumours among the staff that there maybe redundancies. I want to know my legal rights should my employer advise me that I am one of the people that is going to be made redundant?

Answer:

The primary legislation in this area of Law are the Redundancy Payments Acts 1967-2003. Redundancy arises when an employer wants to reduce it’s total number of employees or wants to close down a business completely. A redundancy situation is defined as occurring when there is a dismissal of an employee by an employer, not related to the employee concerned, and the dismissal results wholly or mainly from one of the following situations:

Where an employer has ceased, or intends to cease to carry on the business for the purpose of which the employee was employed by him;

Where the requirements of that business for the employee to carry out work have ceased or diminished or

Where the employer has decided to carry out the business with fewer or no employees;

Where an employer has decided that the work for which an employee was been employed should now be done in a different manner for which the employee is not sufficiently qualified or trained;

Employees have to be selected for redundancy using objective and fair criteria. It is not simply a case of last in and the first out. Whether there are two or more employees engaged in similar, the employer is obliged in the absence of criteria specifically agreed with the Trade Union, to adopt some sort of objective criteria to differentiate between one employee and another.

Failure to do so may render the dismissal unfair. In theory, there is nothing to prevent employers from using any of a wide range of objective criteria such as capability, length of service, attendance record, disciplinary records and skill levels to choose employees who will be made redundant. If there is an existing procedure for selection for redundancy within the employment, the employer must make sure that these procedures apply to each employee who had been made redundant.

The employer is also obliged to provide employee representatives with all details in relation to the proposed redundancies to include:

The reasons for the redundancies,
The number of employees to be made Redundant
The period in which it is proposed to take effect;
The number and descriptions or categories of employees who are proposed to be made redundant;
The criteria proposed for the selection of the workers being made redundant;
The method of calculating any redundancy payments other than those already set out in the Redundancy Acts.

The employees remain entitled to either their contractual termination notice which could be set out in their written contract of employment or their minimum notice as laid down by the Minimum Notice and Terms of Employment Acts 1997-2001. The relevant period of notice for someone with 7 years service would be 4 weeks. The redundancy Act also provide that employees must be given a reasonable time off during the two weeks immediately prior to their dismissal to facilitate them finding new employment.

An employer who wants to dismiss an employee must give the employee statutory notice of the termination of employment by reason of redundancy. This statutory notice must be on a form RP50 (which should be completed) and a copy given to the employee.

This statutory notice of redundancy only applies for those employees who are entitled to a statutory redundancy payment i.e. (those who have more than two years of continuous service). The statutory redundancy payment to be paid is two weeks salary per year of service plus an extra bonus week in addition to the basic payment.

The present statutory maximum is € 600.00 per week and therefore the statutory redundancy payment is capped at this figure and any sum in excess of this is ignored. No employee is entitled to anything over or beyond the statutory redundancy payment but some employers make ex-gratia lump sum payments to their employees in addition to the statutory payments.

As a very rough guide employers can pay a sum equivalent to anything between 2 and 6 weeks pay per year of service on an ex gratia basis. The statutory redundancy payment can be paid tax free but any other ex gratia payments which are being paid to an employee as part of a redundancy package maybe subject to tax. There are however generous tax reliefs in existence for these payments. The amount of relief would depend on that employee’s length of service and salary and employees should opt for the calculation that gives them the greatest tax free lump sum.

If you have been dismissed on redundancy grounds and you believe that it is not valid or a genuine redundancy, or you feel that the manner in which the dismissal was affected was unfavourable, unreasonable or that you have been unfairly selected for redundancy, provided that you have the reckonable service you would be entitled to bring an application before the Employment Appeals Tribunal for unfair dismissal.

The onus is on the employer to show that a genuine redundancy situation existed and that the employee was not unfairly selected for redundancy or discriminated against. If the tribunal finds that there is no genuine redundancy situation or that the selection was unfair it has the following powers:

It can order that the employee is reinstated in the same position as if no dismissal had been taken place and order full compensation for the loss of earnings;
It can order that the employee be reengaged with no compensation for loss of benefits although not necessarily in the same position or on identical terms as existed prior to dismissal;
Award compensation of up to a maximum of two years gross remuneration of basic salary but also including a cash equivalent to all benefits received by the employee as part of his remuneration package which includes pension rights, car allowance etc.

Compensation is the most common form of award made by the Employment Appeals Tribunal as the tribunal is generally reluctant to force an employee on a non willing employer so therefore it is essential that the selection criteria used by an employer selecting employees is fair and reasonable and not discriminatory on any grounds.