Resignation can amount to a redundancy for collective

The definition of “redundancy” for collective consultation purposes differs significantly from the definition used for individual claims for redundancy payments or unfair dismissal.  The Trade Union Reform and Employment Rights Act 1993 expanded the definition of redundancy to mean any dismissal for a reason not related to the individual.

The distinction has important implications.  For example, if an employer wants to introduce a change to terms and conditions but cannot secure its employees’ agreement and so seeks to terminate existing contracts and issue new ones, the dismissal is unrelated to the individual.  It therefore triggers the statutory collective consultation procedure.  Consequently if more than 20 employees are involved the employer will need to negotiate with appropriate representatives of the employees with a view to reaching agreement before imposing the new contractual terms.  Employees would not be entitled to claim a redundancy payment in these circumstances.

In a recent European Court of Justice (ECJ) decision, the ECJ held that where an employee resigned in response to a pay cut imposed by the employer for economic reasons unrelated to the individual employee, the resignation amounted to a redundancy for the purposes of collective consultation obligations under the European Directive on Collective Consultation (the Directive).  The ECJ was clear that although the Directive does not expressly define the concept of redundancy, the employer had unilaterally, and to the employee’s detriment, made significant changes to the employee’s contract, for reasons not related to them individually.  As such, in the Court’s opinion this brought it squarely within the definition of redundancy for the purposes of the Directive.

Employers should be mindful, therefore, when seeking to vary terms and conditions of employment, that employees who resign in response to the variation should be included within the numbers of potential redundancies when considering if collective consultation obligations are triggered.