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Redundancies: getting it right in practice

1 December 2010

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Udara Ranasinghe
LLB (Hons)

Employment Specialist and Partner
Beachcroft LLP

GP practices are seeing perhaps the greatest changes in their history through a combination of PCT funding cuts and the proposals in the NHS white paper for the establishment of GP consortia responsible for commissioning. These twin pressures are likely to see consolidation in the market, with GP practices merging with or acquiring other practices. The human cost of creating efficiencies will inevitably be redundancies in a sector where job losses have been as common as hen’s teeth. So, how should practice managers go about the task in a way which minimises legal risk?

What are the legal risks if we get it wrong?
If a redundancy process is mishandled, the practice can face claims from employees. These can range from unfair dismissal to discrimination and whistleblowing. The costs of defending those claims can be high and the financial penalties where claims succeed can be prohibitive. Last year, compensation in the average unfair dismissal claim was approximately £9,000, and in cases involving sex or race discrimination it was almost £20,000.(1)

In general, the partners in a GP practice will be liable for the costs and liabilities associated with these claims.

The main risk in carrying out redundancies is claims for unfair dismissal. Employees who have more than a year’s service are entitled to be dismissed for a ‘fair’ reason and have a ‘fair’ process applied to them. Complying with the rules for a ‘fair’ dismissal will also limit the risk of other types of claim.

Redundancy is a ‘fair’ reason for dismissal. Redundancies occur where the employee is surplus to the requirements of the practice. Examples are where a practice closes down completely, where a multi-sited practice closes down one sites, or where there is a reduction in the need for certain practice staff (e.g. receptionists) as a result of a practice merger.  Where someone is made redundant because of a capability issue and there remains a need for someone to do their job, this will usually be an unfair dismissal. The issue then becomes a question of whether a ‘fair’ procedure been applied.

What is a fair procedure?
It may be that your practice has its own redundancy policy However, there are also clear principles arising from legislation and case law which employers should apply:

  • Employees must be given reasonable notice that they are ‘at risk’ of redundancy.
  • The pool of those identified ‘at risk’ of redundancy must be correctly drawn.
  • There should be consultation with employees
  • Fair selection criteria must be applied to those in the pool to choose who is to be made redundant.
  • Employees who might be made redundant must be considered for redeployment and given a right of appeal.

Breaking this down into more detail:
1. Placing employees ‘at risk’
Employees should be given fair warning that a redundancy situation may arise so they can consider any steps they can take to mitigate against the consequences of the redundancy (eg, by looking for alternative employment).

2. The pool
Where the practice is closing down one or all of its sites, the pool of those who are at risk of redundancy may be obvious – those working at that site. The issue becomes complicated where redundancies are driven by the need to make efficiencies without closing down the practice (eg, where a merger has occurred).

The practice will need to be able to show that genuine consideration was given to the appropriate pool and that it acted reasonably in reaching its conclusion. As a minimum, the practice should ensure that it considers matters such as:

  • The particular work which will require fewer employees.
  • Which employees do that work (it is important to look at what the employees actually do in reality, not what they are contracted to do.
  • Whether there are employees who are/could be doing similar work.
  • Where practices have merged, employees should not usually be chosen from just one practice.

3. Consultation
Before a final decision is made on which employees will be redundant, the practice should consult with those employees or their representatives. For individuals or small groups of less than 20, consultation will generally be with the individuals. There are no statutory requirements or timescales for consultation, but it must take place in good time before dismissal.

Points to be discussed during the consultation will depend on the specific circumstances, but typically will include:

  • Confirmation the employee is ‘at risk’.
  • The proposed procedure (including selection criteria that will be applied).
  • The proposed time line.
  • The employee’s suggestions of ways to avoid their redundancy or mitigate the consequences.
  • Alternative role.
  • Available support.

After selection criteria (see below) have been applied, points to be discussed should include:

  • Notification of provisional selection for redundancy.
  • The basis for that selection.
  • The employee’s comments on their selection and/or the redundancy process generally.

Employees on holiday, sick leave, maternity or other leave should be included in the consultation process (eg, by telephone communication). The practice should try to accommodate requests for flexibility in how, when and where consultation takes place if possible. Where mass redundancies (ie, more than 20) are envisaged, additional rules apply.

4. Selection criteria
The practice should identify objective criteria on which employees will be selected from the pool to be made redundant. In a situation of practice closure, the selection criteria may be self-evident (ie, everyone working in the practice). Where efficiency is the driver, the selection criteria may be more complex (eg, certain skills and experience, disciplinary record, etc).

Employees should ideally be told of the criteria in advance, and the criteria should be applied fairly to all employees. If this does not happen, there is a significant risk that a resulting dismissal will be unfair or even discriminatory. Care should be taken to ensure that the application of the criteria is not discriminatory (for example, absence related to maternity leave should be discounted).

5. Appeals and Redeployment
If, having gone through consultation and applying the selection criteria, redundancies are still necessary, the individuals should be informed of their selection and notice to terminate served. Each employee should be given the right to appeal against the decision.

Redeployment should be considered once it has been decided that someone should be made redundant. Although GP practices are generally relatively small and redeployment opportunities limited, the practice must consider whether there are any suitable vacant positions for employees at risk. The search for roles must be reasonable and may include making employees aware of jobs that are of a lower grade or attract lower salaries than their current role.

What payments are due on redundancy?
A statutory redundancy payment is usually payable to an employee who has at least two years’ continuous employment. Subject to the employee’s contract of employment, the employee may also have a right to a contractual redundancy payment (for example, NHS employees on Agenda for Change contracts will be entitled to enhanced payments). Generally, the longer an employee has been with a practice, the greater the payments will be. Employees will not be entitled to a redundancy payment if they unreasonably refuse redeployment. Where a practice is arranging for alternative employment with another NHS employer care should be taken – this may not necessarily avoid the redundancy payment. Other payments due on termination may include unworked notice and untaken holiday.

What if redundancies are made following a merger of two practices, or one practice closes down and another takes over its services?
In these situations, additional legislative protection could apply in the form of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).  Where TUPE applies, affected practice employees will have:

  • A right to be informed and consulted through their representatives ahead of the merger or the other practice taking over service provision. If there are no representatives, employees should be given the opportunity to elect some.
  • A right to transfer employment to the new practice which continues to provide the services.
  • A right to have employment terms and service continuity protected. Effectively, the new employer steps into the shoes of the old employer and is deemed by the law to have always been the employer.

Importantly, where an employee is dismissed because of a TUPE transfer, the dismissal will be automatically unfair unless there is an economic, technical or organisational reason (ETO). The ETO defence will usually apply in redundancy situations, but an employer will still have to show the normal unfair dismissal principles discussed above have been complied with.

What if the decision is challenged?
This area can be difficult, especially in GP practices which historically have been small, close-knit employers. Where the guidance above has been complied with, the risk of challenge should be small. The first step is usually an internal appeal, and this will allow understanding of the nature of the challenge and whether it is well-founded.

If the issue cannot be resolved through an internal appeal, an employee can resort to an Employment Tribunal. The Tribunals generally understand the pressures and lack of resources on smaller employers and will take account of this when looking at whether the process applied has been fair. Ironically, as GP practices grow larger and potentially merge to form consortia higher standards will be expected.

1. Ministry of Justice. Employment Tribunal and EAT Statistics 2009-10 (GB). September 2010.