University of Venice Ca’ Foscari Pierre de Gioia-Carabellese Lecturer in Business Law Heriot-Watt University (Professore universitario di business law)

University of Venice Ca’ Foscari

Pierre de Gioia-Carabellese

Lecturer in Business Law

Heriot-Watt University

(Professore universitario di business law)

Solicitor & Notary Public - Avvocato

The Lecture

The dismissal by way of redundancy in the UK: ontology of a legislative

framework and teleology of prospective reforms. A comparative analysis

between the redundancy payment and the Italian ammortizzatori sociali

The Economic Dismissal

Dismissal involving redundancy, reorganisation and

business transfers (for instance TUPE) Redundancy is governed by British legislation (no

harmonisation at European level) However, TUPE is harmonised at European level

(Acquired Rights Directive) Licenziamento economico

The Rationale behind Redundancy

To compensate employees in case of loss of employment

When a dismissal is by way of redundancy, a “statutory” redundancy payment is made available to employees, who have met for qualifying conditions

The employee has got the opportunity to find a different job

The Applicable Legislation

The “start” Contracts of Employment Acts 1965

The current scenario Employment Rights Act 1996

The Legal Mechanism of Redundancy

If the dismissal is for reason of redundancy, entitlement to a redundancy payment

Eligibility 2 years of continuous service Over 65 years old employees

Eligible now (Equality Act 2010) No before the enactment of the

Employment Equality (Age) Regulations 2006

Dismissal by Reason of Redundancy

Sect. 139 Dismissal by reason of redundancy

Employer ceases or intends to cease to carry on business

Employer ceases or intends to cease to carry on business in the place where the employee is employed

The requirements of the business for employees to do work of a particular kind or for employees to carry out work of a particular kind in the place where the employee was employed by the employer, ceased or diminished or are expected to cease or diminish

The First Limb

The employer ceases the business for the purposes of which the employee was employed either wholly or exclusively at the place the employee had been employed

The Second Limb

The fact that the requirements of that business, (i) for employees to carry out work of a particular kind, or (ii) for employees to carry out work of a particular kind in the place the employee was employed, has ceased or diminished either permanently or temporarily

When does the business cease?

It is a matter of fact Melon v Hector Powe Ltd [1981]

HP Ltd owning a factory making suits to be sold through its own outlets

Factory and equipments sold to Executex Ltd Employees remained doing the same job but for E ltd Executex Ltd distributing suits through independent

retailers Held that it was a different business

What is the Place of Business?

Initially, contractual approach The place where the employee has to

discharge his duties according to the contract

If the employer is entitled to transfer the employee (mobility clause), no right to receive the redundancy payment

Haden Ltd v Cowen [1982] I.R.L.R. 314


More recently different approach Curling v Securicor Ltd [1992] Bass Leisure Ltd v Thomas [1994] It is a factual matter, not a contractual one Narrative.........


The company (Bass Leisure Ltd) entitled to transfer the employee either temporarily or permanently to a different location• “your geographic area may be altered, provided that it

remains accessible from your normal residence” Ms Thomas worked for 10 years in the Coventry depot After 10 years she was transferred to a different depot, at

20 miles away (entailed to the transfer were also some organisational changes)

Held that the employee was entitled to terminate her contract by reasons of redundancy

Place of Business and “de facto” Approach

High Table Ltd v Horst [1997] I.R.L.R. 513 What is the place of work is a question to be

answered primarily with reference to actual circumstances (so called “factual test”)

Clauses embodied in a contract of employment to be taken into account but they cannot per se exclude the entitlement to a redundancy payment

“It would be unfortunate if the law were to encourage the inclusion of mobility clauses only to exclude the entitlement to a redundancy payment”

Time of Business It is not relevant for the purposes of the

redundancy Place is required for the reasons of the

redundancy, rather than time Johnson v Nottinghamshire Combined

Police Authority [1974] ICR 170 (CoA)Narrative....

Time of Business “Johnson”

Two civilian clerks employed for more than 20 years in office normal hours Monday-through-Friday

Outside these times, essential clerical works were carried out by police officers

In order to release police officers from these tasks, the clerks were asked to operate different shifts (8am/1 pm and 1pm/8 pm) over a six-day week

Time of Business “Johnson” (cntd)

The refused to operate the new pattern but they were dismissed for misconduct

They challenged the dismissal as they argue they were entitled to claim dismissal by way of redundancy

Held that they were wrong The work was basically the same No redundancy

Time of Business However.........

Archibald v Rossleigh Commercials Ltd [1975] I.R.L.R. 231

Macfisheries v Findlay [1985] I.C.R. 160 Change from night shift to dayshift constituted

a change in the nature of the work done It is of major magnitude Therefore employees entitled to claim

dismissal by way of redundancy

Redundancy for Diminishing Requirements

What is the “work of a particular kind” that ceases or diminishes?

Contract test The work which the employee was under

a duty to do under the terms of his contract

Function test The work that the employee actually did

Transferred Redundancy (or Bumping

– If an employee (A) is redundant, but he is retained in another post because he has got seniority; however the employee who used to hold that job (B) is dismissed;

– B is entitled to claim redundancy;– Although his job remains, the dismissal of the

“bumped” employee is wholly or mainly due to a reduction in the requirements of the business for employees


– Elliott Turbomachinery v Bates [1998] ICR 423• A redundant employee was transferred

to the claimant’s department, bumping the applicant out of a job

• Held that he was redundant


Similarly– Safeways Stores plc v Burrell [1997]

I.R.L.R. 200– Murray v Foyle Meats Ltd [1999] I.R.L.R.

562 (HL)• Maxim: “If the dismissal of an employee was

“attributable” to a diminution of the employer’s need for employees, then it is irrelevant to consider either the contractual obligations or the functions which the employee performed”

Offer of Suitable Alternative Employment

Right to redundancy payment lost if the employee unreasonably refuses offer of suitable alternative employment (Sect. 138 ERA 1996) To commence at the end of old contract

(renewal) Within 4 weeks of termination (trial period)

Offer of Suitable Alternative Employment

Suitability to be tested objectively Standard Telephone Cables Ltd v Yates [1981]

Work which required less skills and regarded as a step backwards potentially unsuitable

Morganite Crucible v Street [1972] I.C.R. 110 The fact that the employee thinks that the

alternative job might last just few months does not mean that it is necessarily unsuitable

Offer of Suitable Alternative Employment (cntd)

Suitability to be tested objectively (cntd) Cahuc, Johnson & Crouch v Allen Amery

Ltd [1966] Alternative job entailing a commuting of 40

minutes deemed as not suitable


Suitability to be tested objectively (cntd) Taylor v Kent CC [1968] 2 Q.B. 560

A redundant headmaster offered an alternative job as one of a pool of mobile teachers (the pay the same)

Held entitled to claim dismissal by way of redundancy for loss of status


Suitability to be tested objectively (cntd) Marriott v Oxford & District Co-operative Society

(No 2) [1969] 3 All ER 1126 In any case, reduction in salary renders an

offer of alternative employment unsuitable by definition


In some cases, to be tested subjectively as well

Bruce v National Coal Board [1967] I.T.R. 159 Mr Bruce diabetic He was offered an alternative job involving

3 shifts, rather than two Alternative job unsuitable

Possible Loss of Entitlement to a Redundancy Payment

• Section 143 ERA 1996

– Fair dismissal for misconduct for strike

– Employee does not lose the entitlement

– However entitled to delay the payment

Calculation of Redundancy Payment

1 week’s pay (to a maximum of £400), multiplied by a number of complete years of service (to a maximum of 20), multiplied by a multiplier of: 0.5 for years of service between the age of 18 and 21 1 for years of service between the age of 22 and 40 1.5 for years of service from the age of 41 onward

Service under 18 does not count

Comparison between British Legislation and Continental

Legislation The matter (redundancy) is not harmonised Therefore, freedom of each country to govern

the matter according to its own strategies For instance in Italy

– Cassa Integrazione Guadagni (remuneration compensatory award)

Italian Legislation

Cassa Integrazione Guadagni (remuneration compensatory award) Conditions

Restructuring, reorganisation or business reconversion, (Law 164/1975) or

Financial crisis (Law 223/1991)

Italian Legislation: CIG

Further Conditions The “award” is allowed exclusively to

business operating in the industry (no commercial activities) and in the agriculture

The company must have a workforce of 15 employees or more


Employees entitled to receive the fund Operai (low-ranking, clerical employees) More recently also Quadri (managers) Exclusion for officers and high-ranking

employees) The award is requested by the employer in

the interest of the employees


Mechanism Up to 80% of the salary of the employee

paid with public funds Maximum of 40 hours per week


Duration Ordinary “CIG”

Three months, to be extended up to 12 months

The period cannot be consecutive


Duration Extraordinary “CIG” (fundamentally

unrecoverable crisis) 2 years With possible 2 renewals of two years

Italian Legislation: Public Employment

“CIG” (both ordinary and extraordinary) applicable exclusively to private employment

As to the public employment, total protection of the job (no possibility of redundancy)

In Italy millions of people employed in the public sector Central institutions (e.g. the parliament)

and local institutions (municipalities, provinces, regions)

Italian Legislation: Public Employment

The principle that the job is untouchable in the public sector is so entrenched that, if the institution by which the individual in employed ceases existing the employee keeps on working and he is transferred to another institution

Therefore, no redundancy

Conclusions

British job market more flexible The mechanism of the redundancy is less expensive for the

tax payer The redundancy applied also to people employed in the public

sector Therefore, the public debt in Britain comparatively low

In Italy (and in continental Europe) The system is very expensive for the public finances E.g. Italy in the middle of a public debt crisis, as the market

does not believe that this system is sustainable Apparently the employee is more protected in Italy

However......

Conclusions

The employee receiving a redundancy payment in Italy is “spoiled” Because he can rely on guaranteed salary for a

long period of time, he is not encouraged to find a new job

Possible fraudulent behaviours: second jobs Secondly, in the public sector in Italy, the employee is

untouchable and, paradoxically, also if his organisation ceases existing, he will receive the salary and will be allocated with another organisation

Conclusions

Some further consequences in the extra-work relationships In Britain the employee potentially at risk of

redundancy; Hence, “poor” quality of life In Italy, particularly in the public sector, stability of

the job, hence theoretically more tranquillity in the family environment and/or personal conditions

Less stress in the interaction of the employee with partner and children

Conclusions

Some further consequences in the extra-work relationships (cntd) In Britain the employee’s skills constantly updated

(he has got to keep his professional know-how at pace with the changes in the needs for a certain job)

The Italian employee (public sector and private sector) may be discharging duties in a job that, in the real world, does not exist any more (and he still gets paid for it!)

Bibliography

P de Gioia-Carabellese, University Lectures, Employment Law and Law of HR Management, Heriot-Watt University, Academic year 2011/2012

P de Gioia-Carabellese ‘Analisi del quadro normativo dell’economic dismissal nel Regno Unito. Un possibile modello di riferimento per l’Italia’ (Working Paper, Adapt – Associazione per gli Studi Internazionali e Comparati sul Diritto del Lavoro e delle Relazioni Industriali, 15th March 2012).

Documents

University of Venice Ca’ Foscari Pierre de Gioia-Carabellese Lecturer in Business Law Heriot-Watt University (Professore universitario di business law)