December 5, 2021

Volume XI, Number 339

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December 03, 2021

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December 02, 2021

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Redundancy or Furlough? – Something for Employers to Think About

With the end of the Coronavirus Job Retention Scheme now only half a dozen weeks away we are seeing the first reported Employment Tribunal decisions around the interplay of the CJRS and redundancy dismissals.  This brings us the beginnings of an answer to the challenge many employers will have faced since the Scheme was introduced in March last year – how can it be fair to make me redundant when you could have kept me on by furloughing me?  Isn’t it your duty to avoid making me redundant if you can?  Both properly and predictably, that answer is “it all depends”.

Mhindurwa –v – Lovingangels Care Limited concerned a live-in care provider made redundant when the pandemic meant that having someone else in your house was no longer such a good idea.  She asked whether she could be furloughed but was told not, on the stated basis that because of the pandemic “there was no work for her”.  Put differently, Lovingangels would not allow Mhindurwa to be paid by the Government to do nothing because there was nothing for her to do.

The Employment Judge noted that these were of course the exact circumstances for which the safety net provided by the CJRS was designed.  As a result, he concluded that when the dismissal was proposed in July 2020 “a reasonable employer would have given consideration to whether [the employee] should be furloughed to avoid being dismissed on grounds of redundancy”.  The precise issue here was a little fudged – it is hard to tell whether the Judge found that there had been no consideration of that question at all or that the explanation which had been provided was so fatuous that it could not be relied upon to evidence any reasonable thought having been given to the question.  Either way, the dismissal was found unfair even though the ET fully accepted that Mhindurwa was in fact redundant.

One or two reports of this case have been headlined “Failure to furlough makes dismissal unfair” or similar, but that is not strictly right. It was the lack of attention to that possibility that was the problem. It is probably just that “Failure to consider furlough and/or give a meaningful explanation for not doing it makes dismissal unfair” is a bit cumbersome as a title.

So if you did consider furlough in place of redundancy, what might constitute a valid reason for not having gone down that road?  The burden here on the employer is not a high one.  Strictly it is only obliged to act within the old “range of reasonable responses”, and consequently while some employers might choose to take a softer and more humanitarian approach than pushing unneeded staff off the books in the middle of a pandemic, the fact that they might extend someone’s employment by furlough is very far from a rule that you have to do so.

The key is being seen to consider the question.  The Employment Judge in Mhindurwa floated consideration of a temporary furlough to see how things would pan out in the live-in care market, though it would not be difficult to make an argument that given the national state of ignorance and fear about the pandemic in July 2020, this would require the employer to hold a view more rosy than Kew Gardens.  Another consideration might be how the redundancy situation arose.  If the lack of need for employees were temporary and very likely to rebound on the ending of the pandemic, that would be a reason in favour of trying a spot of furlough to ride out the bumps.  That would particularly be the case latterly when the picture looking forward has been a bit less daunting and unclear than it was a year ago when Ms. Mhindurwa was dismissed.  However, if things were bad pre-pandemic already, or if it were your clear and reasoned belief that things would not bounce back sufficiently quickly (or at all), then that may legitimately point the other way.  Similarly, if retention of otherwise redundant staff on the CJRS would have incurred costs for the employer, that would be a good reason for not doing it.  For example, you might have a generous enhanced redundancy scheme such that, say, 6 extra months on furlough would have added materially to your ultimate dismissal costs, which would not be covered by the CJRS, or at the time of the redundancy consideration, the CJRS was leaving or was expected soon to leave a proportion of salary and/or NI to be paid by the employer.

As if in illustration of that point, just 2 days before Mhindurwa was heard, the ET issued its decision in Handley- v – Tatenhill Aviation Limited.  Here Mr. Handley was a civil flying instructor made redundant when the pandemic clipped the wings of the private tuition business.  He was put on furlough but then made redundant during it.  His claim included a similar argument – how can it be fair to make me redundant when I could have been left on furlough at no cost to Tatenhill’s business?  Although Handley won his unfair dismissal claim on other grounds, the furlough argument was rejected.  Tatenhill had considered that possibility but had decided not to take that route because it could not see the need for Handley’s role coming back even post-pandemic, and because it feared that if it made him redundant later, it would have the costs of his notice to pay.  The ET thought that those were valid considerations, reminding itself expressly that when considering whether an employer’s response fell within the range of reasonable responses, the test was not what the ET itself might have done but whether how the actual employer had approached it could be said to be something which no reasonable employer could have done.  Here there was both the obvious consideration of the furlough question and a viable rationale for rejecting it which were both lacking in Mhindurwa.

Therefore you can ignore any employee suggestion that a redundancy when you might have furloughed instead will necessarily be unfair – the real question will be whether you had a halfway decent reason for not using the CJRS to its maximum, and if you did, you should be ok.

As a small and sad PS, despite his win on the law, Handley was awarded zero compensation.  That was because the ET concluded that even without the procedural flaw he had got home upon, it was absolutely inevitable that he would have been redundant anyway.  This was not a hard decision – with commendable (though in hindsight perhaps regrettable) frankness, Handley himself agreed that given a free hand to pick one of himself and his colleague to retain, he would have chosen the colleague too.

© Copyright 2021 Squire Patton Boggs (US) LLPNational Law Review, Volume XI, Number 224
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About this Author

David Whincup Employment Attorney Squire Patton Boggs Law Firm
Partner

Following 10 years at a Magic Circle firm, David has been head of our London Labor & Employment Practice since 1994.

His expertise gained from over 30 years as a specialist employment law practitioner cover a wide variety of employment-related issues, including individual and team recruitment issues, policy and contract drafting, disciplinary and grievance procedures, individual and collective redundancies, the defence of employee discrimination and dismissal claims and other litigation, whistleblowing, employee health, data protection and matters surrounding confidentiality and...

+44 20 7655 1132
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