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Employment Law Case Update: Redundancy and Alternative Employment

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With the furlough scheme coming to an end in a matter of days, unfortunately more businesses are facing the difficult decision of making redundancies, even with the new Job Support Scheme on offer.  It is vital that if you are considering redundancies in your business that you follow the right procedure, which includes offering suitable alternative employment as part of the procedure.  Our Employment Law team here review the case of Aramark v Fernandes, in which the Employment Appeal Tribunal (EAT) considered whether the possibility of future work qualifies as “alternative employment” in redundancy cases.

Mr Fernandes was an employee of Aramark from December 2007 until his redundancy in December 2017. Mr Fernandes claimed that his redundancy was unfair, arguing that under section 98(4) of the Employment Rights Act 1996, Aramark had acted unreasonably.

Aramark had a list of workers whom the company could engage whenever it had a shortage of labour. Aramark regularly engaged workers from the list, and those on it had “reasonable prospects” of occasional work. However, those on the list were not employees of Aramark, and Aramark was under no obligation to provide them with work. Mr Fernandes argued that Aramark should have put him on the list of workers instead of making him redundant as this would give him the possibility of future work which was better than no work at all. By failing to do so, he claimed, Aramark failed to properly consider alternatives to redundancy and thus acted unfairly.

The resolution of this case revolved around the interpretation of section 98(4) of the Employment Rights Act. This section states that the fairness of a dismissal partly depends on whether the employer acted reasonably, which includes considering whether there were any alternatives to dismissal. The Employment Tribunal (ET) ruled in favour of Mr Fernandes. It accepted that Aramark’s failure to place Mr Fernandes on the list of workers was unreasonable and therefore found the redundancy to be unfair.

Aramark went on to appeal the decision, which the EAT allowed.  When considering section 98(4) requiring employers to act reasonably, and that this includes considering alternatives to redundancy, it found that being put on the list was not an alternative to dismissal. This is because in order for Mr Fernandes to be placed on the list, his redundancy would still have to take place. He would no longer be an employee, but rather a potential worker with the possibility of future work. While this position may have been preferred by Mr Fernandes, there was no obligation on employers to provide an alternative that might have “the potential to mitigate the adverse effects of dismissal.”

The EAT did not rule on the reasonableness of the decision to not put Mr Fernandes on the list, instead finding the decision outside the scope of section 98(4). Therefore, it could not be said that the decision made the redundancy unfair and the EAT found in favour of Aramark.

This decision further clarifies employers’ responsibility to act reasonably when contemplating redundancies. It is accepted that when undergoing a redundancy process employers should consider alternative employment for those at risk. This case established that the possibility of ad hoc work does not count as alternative employment for the purposes of redundancies. Again, this is because ad hoc work, such as being placed on a list of potential workers, doesn’t prevent the redundancy. Therefore, failing to place a former employee on a list of potential workers is not “unreasonable” under s 98(4) for the purposes of deciding whether the redundancy was fair.

If you have any questions regarding this article, you can call our Employment team today on 023 8071 7717 or email employment@warnergoodman.co.uk.

This was previously part of our weekly Employment Law Newsletter. If you would like to subscribe, please email us at events@warnergoodman.co.uk or just fill in our subscription form.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.