White v HC-One Oval Ltd
Voluntary redundancy occurs when an employee chooses or applies to be made redundant. This usually takes place during a compulsory redundancy process and in return for an enhanced redundancy package, earlier exit or other favourable terms. It is not mandatory for employers to offer voluntary redundancy (unless there is a contractual obligation to do so) but doing so can help:
- reduce (or avoid altogether) the need for compulsory redundancies (and the associated conflict and cost); and
- evidence that a fair procedure has been followed if compulsory redundancy dismissals are required (particularly in a collective redundancy situation).
Nevertheless, voluntary redundancy remains a dismissal by the employer (in most cases). In Optare Group Ltd v Transport and General Workers Union the EAT held that voluntary redundancy is a dismissal (by reason of redundancy) when it is by the invitation of the employer as part of a redundancy process. It is only a termination by mutual consent when the employee makes an informed choice to terminate their employment before, or outside of, any redundancy process (Khan v HGS Global Ltd).
Accordingly, for a voluntary redundancy dismissal which is part of a wider redundancy process to be fair, the employer must be able to satisfy the usual test in s.98 of the Employment Rights Act 1996 (ERA). In other words, employers need to show that there was a genuine redundancy situation (not a sham) which meets the statutory definition of redundancy (s.139 ERA) and that a fair procedure was followed (including fair selection where necessary and consultation).
Ms White was employed as a part-time receptionist in a care home owned by HC-One Oval Ltd (HC-One). Ms White was provisionally selected for redundancy when HC-One decided to reduce the number of employees carrying out reception and administration work. During the consultation process HC-One accepted Ms White’s request to take voluntary redundancy.
Following the end of her employment, Ms White submitted an unfair dismissal claim to the Employment Tribunal. She alleged that the redundancy process was a sham and that she had been targeted for dismissal because:
- she had raised a grievance (in the months leading to the announcement of the redundancy process) that she had not been paid for providing additional administration support to cover staff illness; and
- HC-One had always intended to keep the full-time receptionist who had been recruited just before the redundancy process started and who (unlike Mrs White) had no childcare responsibilities.
Ms White also said the redundancy process was unfair as she had not been offered an available administrative role as alternative employment.
The Tribunal struck out Ms White’s claim on the basis that it could have no reasonable prospects of success. The Tribunal said Ms White’s claim was 'fundamentally flawed’ as she had volunteered for redundancy. This meant she could not dispute the existence of a redundancy situation or HC-One’s decision to dismiss her.
Ms White appealed.
The EAT held that the Tribunal was wrong to strike out Ms White’s claim. Not every voluntary redundancy situation is automatically a fair dismissal. The Tribunal had been wrong to ignore Ms White’s complaints about the process leading to her request for redundancy and should have heard evidence on this before determining that her claim had no reasonable prospects of success.
Employers may be alarmed that an employee who puts their hand up to volunteer for redundancy can then bring a claim for unfair dismissal. It will likely make the process of inviting and considering applications for voluntary redundancy less attractive if employees can “have their cake and eat it”.
However, it is important not to forget that the facts of this case are rare – it is very uncommon for employees that volunteer for redundancy to subsequently dispute their termination in this way. This is certainly the exception, rather than the norm.
Our view is that this should not deter clients from considering voluntary redundancy – failing to do so is likely to lead to a greater chance of disputes overall and also increases the risk of the redundancy process as a whole being found to be unfair.
However, this case should be borne in mind if a disgruntled employee volunteers for redundancy. Although it may be tempting to secure a swift exit (and still ultimately the preferred outcome), it is sensible to consider any outstanding concerns or grievance first in order to assess the risk of a future claim. If it is determined that a dispute is likely or inevitable, their employment terminating on grounds of voluntary redundancy, rather than compulsory redundancy, will still probably be advantageous for the employer.
If the risk of dispute is still too high for the employer’s appetite, a settlement agreement should be made a condition of any voluntary redundancy application that is accepted – especially if it is accompanied by an enhanced redundancy payment.