Trying times

Large-scale redundancy programmes are being implemented in the public sector and a wave of outsourcings is expected in the near future. Emma Satyamurti looks at employees' rights in these situations.

The age of austerity is here. But as the recent TUC protest march demonstrated, the government’s campaign to win over hearts and minds has by no means yet been won. That does not of course mean that there will be any stay of execution, and very many public sector workers face an uncertain future. It has never been more important for employees to be aware of their rights, and of what employers can and cannot lawfully do.

There are two main types of situation which are likely to become increasingly prevalent within public sector organisations. Large numbers of public sector workers will lose their jobs as a result of the cuts.  Many others will find themselves caught up in outsourcing arrangements as parts of public services, and the back-office functions that support their delivery, are transferred from the public to the private sector.

Dismissal by way of redundancy is one of the potentially lawful reasons an employer can give for a dismissal. This can make successfully challenging a redundancy difficult. Given the current economic climate and the very significant reductions in their budgets with which most public sector organisations are having to grapple, it is unlikely to be difficult for public sector employers to show that a genuine redundancy situation exists. However, in order to escape a finding of unfair dismissal, an employer must do more than simply show that redundancy is the reason for terminating the employee’s employment. It must also show that it has followed a fair process in implementing the redundancy.

What makes a redundancy process fair? Firstly the employer will need to be able to demonstrate that employees were fairly selected for redundancy by applying objective and transparent criteria. Such criteria should not be discriminatory, or applied in a discriminatory way. For example where measures relating to productivity or sickness absence are used, an employer will have to consider whether it is appropriate to make adjustments to the scores of disabled employees where disability may have impacted on their productivity or sickness levels. Equally, selecting people who work part time purely for that reason could be unlawful too.

Another important obligation on employers undertaking a redundancy exercise is to offer suitable alternative employment to those at risk wherever possible. This could mean, for example, not advertising any vacancies externally and prioritising applications by existing employees at risk of redundancy. Further, it may be unlawful to require certain categories of employee to compete for vacancies, specifically disabled employees and those on maternity leave.

Consultation is also key to ensuring that any redundancy exercise is fair. Where the employer proposes to make 20 or more employees redundant more onerous collective consultation obligations will bite. Failing to follow these obligations gives rise to compensation claims for all affected employees. Trade unions and (where no union is recognised) employee representatives have an important role to play in ensuring that employers carry out a fair process and that consultation is meaningful. They can also bring their expertise and influence to bear in ensuring that the selection criteria used are fair and create a level playing field.

If there is no alternative to redundancy, employees with two or more years’ service will be entitled to a statutory redundancy payment calculated by reference to their age and length of service. They are also entitled to serve their notice period or (depending on the terms of their contract) to a payment in lieu of notice. Employers will often seek to enter into a compromise agreement with the employee whereby in return for an additional (often modest) ex-gratia payment, the employee agrees not to bring any legal claims. This can sometimes be a useful opportunity for employees to negotiate further add-ons, such as an agreement by the employer to provide a positive reference or outplacement services.

An employee who considers that they have been unfairly dismissed can bring a claim in the employment tribunal. A claim must be issued within three months less one day of their date of termination.

While many public sector workers can expect to lose their jobs altogether, many more are likely to find their jobs being outsourced to new private providers. Employees in this situation enjoy considerable protection under the Transfer of Undertaking (Protection of Employment) Regulations 2006. This protection has three main components. Firstly, the transfer of employees to the new employer is automatic and the receiving employer inherits all the rights, liabilities and obligations associated with the transferring employees. As part of this, the employees are entitled to retain their previous public sector terms and conditions (with some limitation in relation to pension benefits).

The second element of the protection is that where a dismissal is found to be either because of the transfer itself, or for a reason connected with the transfer (with some exceptions), it is deemed automatically unfair. This means that if, for example, a worker in a council’s refuse collection service were dismissed in the context of an outsourcing process because the new provider wished to recruit their own new staff on different terms and conditions, the dismissed employee could seek compensation from the employment tribunal.

The third element of the protection under TUPE is the obligation on both the old and new employer to inform (in all cases) and consult (where changes are proposed) the affected employees, either via any recognised trade union or via elected employee representatives. In cases where the employer breaches its duty to inform and consult, the affected employees could be entitled to a payment of up to 13 weeks’ uncapped pay.

One area of potential difficulty following an outsourcing exercise that may only emerge down the track, is that employees may no longer benefit from nationally negotiated pay and condition schemes where their trade union is not recognised by their “new” employer.

While avoiding redundancy may be a huge relief in the short term, it remains to be seen to what extent the security and benefits traditionally associated with employment in the public sector will survive in the market driven world of private business.

Emma Satyamurti is a solicitor in the employment team at Russell Jones & Walker. She can be contacted on 020 7657 1535 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..