The rules around transferred redundancy

16 Apr 2018 By Charles Wynn-Evans

Can an employee be dismissed to make way for someone who has been made redundant? Charles Wynn-Evans reports

The issue of ‘bumping’ – or transferred redundancy – has long caused concern for employers that are unsure if they can use it in a redundancy situation; whether they are obliged to take the initiative to address bumping with an employee with whom they are conducting a redundancy consultation; or how they should deal with a suggestion to apply bumping by an employee who would otherwise lose his or her job as a result of redundancy. 

In Mirab v Mentor Graphics, the claimant employee, who was employed as the company’s only sales director, had argued that his dismissal by reason of redundancy was unfair because, among other things, his employer had failed to consider bumping any of its account managers, the level below the claimant. 

The employment tribunal (ET) was satisfied that the claimant’s role as sales director was genuinely redundant and that the employer had acted reasonably in its consideration of whether any alternative vacancies were available.

More specifically, the ET considered that the employer had not been required to consider bumping on the basis that the obligation to do so only arose if the employee had raised it. The employee had given no indication that he would have wished to move into an account manager role. 

The Employment Appeal Tribunal (EAT) upheld an appeal against the ET’s decision for several reasons, including the fact that the ET had adopted the wrong approach to the consideration of the issue of bumping. The ET had assumed there was a general rule that an employer is not required to consider bumping unless the employee whose position was redundant has specifically raised the issue with the employer. This was not consistent with previous case law.

In addition, the ET’s finding that the claimant had given no indication of being prepared to consider being transferred into an account manager role could not stand, since it was clear he had given such an indication at least once during the consultation process and had made other statements that could be construed as indicating that willingness. The ET’s decision could not stand and the case was remitted to the ET to address the issues on the basis of the correct legal principles.

The EAT made it clear that, in a redundancy case, the employer’s consideration of alternatives to dismissal of the otherwise redundant employee will generally involve looking for other potential roles that are vacant at the time.

There may be cases where it might be reasonable to look for a vacancy that might be created, possibly at the expense of another employee. However, there is no rule that an employer must always consider bumping, not least as it might not be reasonable to expect the employer to initiate a move of the employee into a subordinate and less well paid role, which might not be seen as something that the employer should reasonably be expected to initiate. The situation will depend on the specific circumstances. 

As the EAT indicated in Fulcrum Pharma (Europe) Ltd v Bonassera, “a starting off point may be to determine within the consultation process whether the more senior employee would be prepared to consider the more junior role at the reduced salary”, whereas the EAT indicated in Mirab that it can be open to the ET to find it was within the range of reasonable responses for the employer not to consider the point unless and until raised by the employee. 

As the EAT indicated in Lionel Leventhal Ltd v North, the question of whether it is unfair for an employer to terminate the employment of an employee by reason of redundancy without considering bumping is unfair depends on the particular facts. Relevant factors will include whether there is a vacancy, how different the two jobs are, the difference in remuneration between the jobs, the two employees’ relative length of service and the qualifications of the employee in danger of redundancy.

Employers planning redundancy exercises therefore need to ensure they do not ignore the possibility that it may be reasonable for them to consider bumping as part of the redundancy process, and that they are ready to consider how they would respond to a request to consider bumping made by an employee during the consultation process. 

Charles Wynn-Evans is a partner at Dechert 

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