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Redundancy - Avoiding an Unfair Dismissals Claim

Unfair Dismissals

The Unfair Dismissals Acts, 1977 to 2007 provide that a dismissal of an employee shall be deemed not to be an unfair dismissal, if it results "wholly or mainly" from the redundancy of the employee. Redundancy may therefore be an absolute defence to a claim for unfair dismissal; however, employers must strictly adhere to the definition of redundancy.

A redundancy will not be a valid defence where:

  • the employee was unfairly selected for redundancy or was selected in contravention of an existing redundancy procedure where there were no special reasons for departing from the procedure; or
  • the redundancy was not a genuine redundancy.

The primary legislation governing redundancies in Ireland is the Redundancy Payments Acts, 1967 to 2007. A redundancy situation is defined as occurring when there is a dismissal of an employee by an employer, not related to the employee concerned, and the dismissal results "wholly or mainly" from one of the following situations:

  • Where an employer has ceased, or intends to cease, to carry on the business for the purposes for which the employee was employed by him, or has ceased or intends to cease to carry on that business in the place where the employee was so employed;
  • Where the requirements of that business for an employee to carry out work of a particular kind in the place where he was so employed have ceased or diminished or are expected to cease or diminish; or
  • Where the employer has decided to carry on the business with fewer or no employees whether by requiring the work for which the employee had been employed (or had been doing before his dismissal) to be done by other employers or otherwise; or
  • Where an employer has decided that the work for which the employee has been employed (or had been doing before his dismissal), should henceforth be done in a different manner for which the employee is not sufficiently qualified or trained; or
  • Where an employer has decided that the work for which the employee has been employed (or had been doing before his dismissal) should henceforth be done by a person who is also capable of doing other work for which the employee is not sufficiently qualified or trained.

There are two important characteristics of redundancies, namely, impersonality and change. It is the function, and not the person, that is made redundant. The redundancy must be for reasons not related to the employee concerned and must not be merely making way for an alternative employee to do the same job. It is a key principle of the law of redundancy that the role no longer exists, not the person. Where an employee has been dismissed on redundancy grounds and believes that it was not a valid redundancy, or feels that the manner in which the dismissal was effected was unfair or unreasonable, or that he was unfairly selected for redundancy he will be entitled to bring an application for unfair dismissal. An employee will usually need to have 12 months continuous employment in order take such a claim. In the event that the dismissal arises as a result of a transfer of an undertaking, an employee need not have 12 months continuous service. The onus is on the employer to show that a genuine redundancy situation existed and that the employee was not unfairly selected for redundancy.

An employer cannot simply suggest that its workforce requirements will cease or diminish at some distant time in the future. The employer must be in a position to show that a redundancy situation genuinely existed. If the dismissal is not wholly or mainly attributable to redundancy, it will be an unfair dismissal. Redundancies may come about following a re-structuring of a business; however, a restructuring of a business cannot be used to engineer a redundancy situation.

Selection for Redundancy

Natural Justice and Fair Procedures:

The rules of natural justice must apply when taking a decision to dismiss an employee on grounds of redundancy. Employers must act reasonably in taking the decision to dismiss a person on the grounds of redundancy. Redundancy legislation provides that "in determining if a dismissal is an unfair dismissal, regard may be the reasonableness or otherwise of the conduct (whether by act or omission) of the employer in relation to the dismissal".

Redundancy Procedures:

Employers should put in place a redundancy procedure and this procedure should be strictly adhered to. Such a policy should provide for a notification and consultation process in advance of decisions being taken to make employees redundant and it should clearly set out the selection process which will be followed.

Notification and Consultation:

Employees should be notified and consulted in advance of any decision being taken to make them redundant. Failure to hold any selection process or consultation with the claimant renders a dismissal on the grounds of redundancy unfair. Employers must also give due consideration as to whether there are any alternatives available to them such as offering alternative employment and, where qualifications or training are the criteria, whether the existing employee could be offered training to assist an existing employee continue in employment.

Fair Selection for Redundancy:

Once it is established that redundancies are necessary, employers must decide which employees are to be made redundant. If an employee is dismissed due to redundancy but the circumstances constituting the redundancy applied equally to one or more employees in similar employment with the same employer, who are not dismissed, the dismissal will be deemed to be unfair where the selection of a particular employee:

  • resulted wholly or mainly from one or more of the following matters:  

    • the employee's membership of a trade union or engaging in trade union activity;
    • the religious or political opinions of the employee;
    • civil proceedings whether actual, threatened or proposed against the employer, to which the employee was or will be a party or is likely to be a witness;
    • criminal proceedings against the employer, whether actual, threatened or proposed in relation to which the employee has made, proposed or threatened to make a complaint or statement to the prosecuting authority or to any other authority connection with or involved in the prosecution of the proceedings or which the employee was or is likely to be a witness;
    • the race, colour or sexual orientation of the employee;
    • the age of the employee;
    • the employee's membership of the travelling community;
    • the pregnancy of the employee; or
  • was in contravention of an established procedure (whether agreed between the employer and the employee or a trade union or established by the custom and practice) and there were no special reasons justifying a departure from that procedure; 

Where there is no established procedure and the dismissal was not on foot of the eight grounds listed above then consideration will be given to the reasonableness of the employer's decision. Where there are two or more employees engaged in similar employment, the employer is obliged, in the absence of an established procedure, to adopt objective criteria for determining who should be selected for redundancy and in the absence of such criteria an employer should resort to the "last in first out" principle.

Employers must ensure that the criteria chosen are applied consistently across the board. The employer must be able to demonstrate that a particular employee had been compared to others who might have been made redundant and had been selected fairly on the basis of the pre-determined criteria and must be able to show that the procedure was applied to each employee who has been made redundant.

Departure from an established procedure without special reasons justifying such a departure will give rise to an inference of unfair selection for redundancy and ultimately a finding of an unfair dismissal.

Severance Agreements

Employers can try to limit any further action a redundant employee can take by entering into a severance agreement at the time of redundancy. Extreme care should be taken when asking an employee to sign such an agreement as the employee may subsequently claim that the agreement was signed under duress and that the agreement is accordingly unenforceable. If an employer wishes to put such an agreement in place, it is important that the redundant employee is voluntarily signing it and that they know and understand the contents thereof. The employee should obtain, and the agreement should provide for, independent legal advice or advice from some other qualified person.