Headcount reduction not necessary for redundancy

In the recent case of Packman t/a Packman Lucas Associates v Fauchon (EAT/0017/12) the Employment Appeal Tribunal confirmed that an employee who was dismissed because of a downturn in the employer’s work (and therefore a reduction in the hours to be worked) was dismissed on grounds of redundancy – even though there was no reduction in the number of employees required.

The claimant, Mrs Fauchon, was employed to provide book-keeping services. Following the economic downturn, and the introduction of new accounting software, there was less need for Mrs Fauchon to work her usual hours. She was asked by her employer to reduce her hours significantly. She refused and was subsequently dismissed.

One of her claims was that she had been dismissed on grounds of redundancy, and therefore entitled to a redundancy settlement.

The tribunal found that the reduction in business meant there was a corresponding reduced need for her book-keeping services, and as she did not agree to reducing her hours, the reason for the dismissal was indeed redundancy. The tribunal confirmed that Mrs Fauchon was entitled to a redundancy payment of £11,210.

Interestingly, in reaching its’ decision, the tribunal chose not to follow the relevant authority of Aylward v Glamorgan, which indicated that there must be a reduction in the number of employees before a dismissal can be considered as a redundancy. The decision in Aylward was criticised in Harvey on Industrial Relations and Employment law, which seems to have had an effect on the tribunal’s decision.

Packman appealed, arguing that the tribunal’s decision went against Aylward and that this decision should have been binding.

The EAT dismissed the employer’s appeal. The tribunal’s decision was in line with the High Court’s decision in Hanson v Wood while Aylward was inconsistent with previous Court of Appeal observations.

The EAT referred to s.139(1)(b)(i) of the Employment Rights Act 1996. This provides that “an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to the fact that the requirements of that business for employees to carry out work of a particular kind…have ceased or diminished or are expected to cease or diminish.” Fundamentally, if the amount of work available for the same number of employees diminishes, the dismissal of an employee caused wholly or mainly for that motive is a redundancy.