Amid the current uncertainty over the UK economy, the Centre for Economics and Business Research (CEBR) has suggested in their recent report that around 7,000 UK businesses are likely to go insolvent every quarter in 2024.
To avoid businesses going under, many employers could look at business restructuring. One of the consequences of this, however, is that workers could face redundancy if no suitable alternative is found to keep them in work.
The obligation of the employer is to consider suitable alternative employment. This is outlined in the provisions of the Employment Rights Act 1996, and under Section 141 of the Employment Rights Act 1996. These highlight how an employee at risk of compulsory redundancy will lose their right to any statutory redundancy payment if they unreasonably refuse an offer of suitable employment made by their employment.
How are these Factors Assessed?
The test is two-limbed. Namely, was there an offer of suitable alternative employment, and – where the offer of suitable alternative employment is refused, was this refusal unreasonable?
Factors affecting suitability depend, amongst other things, on whether or not the new role is broadly equivalent to their old one. To assess this, matters such as working environment, pay, loss of status, loss of fringe benefits, and working hours, all need careful consideration. In addition, employers must also consider the employee’s skill, aptitude, and ability to do the new role. Effectively, this is more of a subjective assessment to gauge how the worker feels about their offer of alternative employment.
When employers get the process wrong, and refuse to pay statutory redundancy pay on the basis of the employee’s refusal being unreasonable, they run the risk of a costly employment tribunal claim.
Mid and South Essex NHS Foundation Trust v Stevenson and Ors 2023
The Mid and South Essex NHS Foundation Trust employed three employees in Head of HR roles. As a result of business restructuring, their roles became redundant. All three were offered roles as Senior HR Leads as an alternative to redundancy – with their day-to-day operations remaining the same, but now needing to report to the Head of HR for the group companies.
The offer was rejected because of a loss of status based on changes in line management. The NHS Trust disagreed with the employees’ stance as it felt their status would improve with additional tasks. As such, they decided to withhold redundancy pay on the basis that the employees’ decision to reject the offer was unreasonable. As a result, the employees took the matter to the Employment Tribunal (ET).
What did the Employment Tribunal Decide?
The matter was first heard in the ET in June 2019. Their claims for redundancy payment were dismissed as the tribunal held that the role of Senior HR Lead was a suitable alternative employment option in relation to the employees in question. As a result, they had unreasonably refused the offer and were not entitled to redundancy payments. The employees then appealed this decision.
What did the Employment Appeal Tribunal Decide?
The Employment Appeal Tribunal (EAT) allowed the appeal, concluding that there had been insufficient analysis of the suitability of the roles. The claims were then remitted to the same Employment Tribunal.
What did the ET Find when the Case Remitted?
The Tribunal reviewed matters again, and – after a detailed analysis of the roles, held again that the employer’s offer was suitable alternative employment as it related to the employees in question. However, the employee’s decision to reject the offer was – in fact, not unreasonable. As such, they were not excluded from their entitlement to statutory redundancy pay. The employer then appealed this once again.
What was the Final Decision of the EAT?
The Employment Appeal Tribunal stressed the importance of keeping issues of job suitability and the reasonableness of an employee’s refusal of an offer as separate matters. They were satisfied that there was no error of the law by the ET in their decision. While the new roles were suitable, it was not unreasonable for the employees to refuse the offer - despite their incorrect objective perception that the roles were of lower status with less autonomy. They were therefore entitled to their redundancy payment.
The EAT highlighted the reasons for refusal that the ET had previously held to be reasonable. This includes – but is not limited to, job security, concern about maintaining leisure time, genuine but irrational fears about health influenced by family history, and concerns about disrupting children’s schooling.
The article is for informational and educational purposes only, and should not be relied upon as legal advice. If you require any further assistance, please do not hesitate to contact our free Advice Line Team on 0116 274 9193.
