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The State of the High Street: Redundancy and Settlement Agreements

Posted on 25th September, 2019

It seems that we currently do not go a week without reading about a high street brand or well-known company that is going through difficult times or facing the threat of administration, with Thomas Cook being the latest to fall. Further financial uncertainty and concerns that the UK might be facing another recession (not to mention the dreaded ‘b’ word b****t) will undoubtedly mean companies will look at restructuring or making cuts. A thought should therefore be spared for staff who are caught up in this uncertainty and potentially facing a redundancy situation, especially with Christmas fast approaching.

Redundancy can generally occur in the following circumstances: the employer ceases carrying on the business in which the employee worked; the employer ceases carrying on the business in the place in which the employee worked; or the business needs fewer people carrying out work of a particular kind.

Where an employer seeks to fairly dismiss an employee in a genuine redundancy situation then the employee will have rights to a redundancy payment, the application of a fair redundancy procedure as well as reasonable time off to look for alternative employment.

To qualify for the above rights and a redundancy payment an employee will need to have two years’ continuous employment. The aim of the payment itself is being made to compensate the employee for losing their job. Some organisations have their own enhanced redundancy schemes but otherwise a statutory redundancy payment will be calculated based on the employee’s age and length of service.

For a procedure to be considered fair it must comprise of a number of stages starting with warning and consultation (genuine); fair basis for selection (i.e. criteria but can be just one person); consideration of alternative employment (employee can also make suggestions); and the opportunity to appeal the decision.

It is also worth noting that an employee who has been given notice of redundancy could be entitled to time off to look for alternative employment. In practice, an employee would have to request reasonable time off (which can include up to two days paid time off) and employers would not be able to refuse it unreasonably.
Employers who are undergoing restructure or reorganisation and believe there may be impending redundancies may offer or enter into negotiations with affected employees to end the employment relationship by way of a settlement agreement. This can be beneficial for both the employer and employee, however it does not negate the employer’s existing obligations relating to redundancies.

As part of any settlement agreement the employer must pay for the employee to receive independent legal advice on the terms and effect of the agreement itself. The legal advisor must ensure that the employee understands the obligations that the agreement imposes on them and they understand what claims they are waiving the right to bring in the Tribunal or Courts.

In redundancy situations the settlement agreement will state that the employment is being terminated by reason of redundancy before setting out the settlement terms including redundancy pay (although it may be enhanced or referred to as a termination payment or compensation).

I myself have personally seen an increase in settlement agreement instructions in circumstances where I have been acting as the legal advisor for employees whose employers are in the process of restructuring. If you would like more information on redundancy and/or settlement agreements, please contact a member of the Employment Team or myself. Matthew Rowlinson, Employment Solicitor, Jacksons Law Firm e: t: 0191 206 9617.

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