Employment Law Bulletin November 2017

Voluntary redundancy – Traps for employers to avoid

Will the creation of a voluntary redundancy scheme create contractual rights for employees? The EAT considered this point in Lynham & Rooney v Birmingham City Council.

As part of its major restructuring plan, Birmingham City Council announced that “eligible” employees would be entitled to apply for voluntary redundancy on favourable terms.

Mrs Lynham and Mr Rooney (employees of the Council) subsequently sought to apply for voluntary redundancy but were informed that they were not eligible. The Council took the view that the department in which the employees worked was going to be shut down entirely and that they would therefore be selected for compulsory redundancy in due course.

The employees claimed unfair dismissal on the grounds that their applications for voluntary redundancy had been refused. They also claimed that this amounted to a breach of contract.

In the first instance, the Employment Tribunal rejected both claims. On appeal, the EAT considered the contractual issue. The employees argued that the Council had invited all staff “affected” by the restructuring to apply for voluntary redundancy.  The Council attempted to distinguish between employees who were “affected” and those who were “eligible” to apply for voluntary redundancy. The latter group were contacted directly by the Council and provided with details about how they could apply for voluntary redundancy. The Council also argued that as they were not required to offer any sort of voluntary redundancy scheme, they were entitled to decide the eligibility criteria for the scheme.  Further, even eligible employees did not have a right to have their applications for voluntary redundancy accepted by the Council.

The EAT held that the Council had used the words “affected” and “eligible” interchangeably. This created the impression that any person who was affected by the restructuring would also be eligible to apply for voluntary redundancy and this constituted a contractual statement. The EAT decided that the Council was therefore in breach of contract by refusing to allow the two employees to volunteer.

The EAT clarified that this does not mean that employees have a right to have their applications for voluntary redundancy accepted. However, it was not a valid basis to refuse the employees’ applications merely because they would later be selected for compulsory redundancy.

Employers will need to consider how opportunities for voluntary redundancy are announced to ensure that it is clear on the face of it whether an employee is eligible to apply.