Confusion continues over reduced hours and redundancy payments

It was widely assumed that the Packman decision had cleared up any remaining uncertainty about whether imposing a reduction in hours could give rise to an obligation to make a statutory redundancy payment. But a month later we were presented with the decision of another division of the EAT in Welch v The Taxi Owners Association which at first sight reaches the opposite conclusion. Where does that leave us?

Packman has been widely reported and concerned a bookkeeper. The employer wanted  to cut her hours mainly because a new software package had reduced, but not eliminated, the need for her services. When she refused to agree to reduce her hours she was dismissed and claimed a statutory redundancy payment. Both the ET and the EAT agreed she was entitled to one. They dismissed arguments based on an earlier EAT decision called Aylward, which appeared to suggest that only a reduction in total headcount could trigger liability for a redundancy payment. Aylward was widely regarded as anomalous, but had not been expressly overruled.

The situation in Welch seems at first sight pretty similar. The claimant was a radio operator for a mini-cab firm who worked night-shifts. However as a result of increasing competition in the area from other operators, the volume of business went down and the employer no longer needed an operator to cover nights. As a result, the employers wanted to reduce her weekly hours from 36 to 28. The claimant refused to agree to this and resigned. 

At first sight Welch seems to suggest that there could be no entitlement to a redundancy payment in this situation. The summary of the decision produced by the EAT says this (words in square brackets supplied):

“There was no question of redundancy since, although the Respondent’s need to have the Claimant (and another employee) work as many hours as before [had reduced], there was no reduction in their need for employees to work as radio control operators.”

But a closer reading of the decision reveals that the employee did not actually claim a redundancy payment when she lodged her application to the tribunal. So neither the ET nor the EAT was, strictly speaking, called on to decide whether she would have been entitled to one, had she claimed it at the right time.

That means that we can safely rely on Packman. It establishes the principle that liability for a statutory redundancy payment can be triggered either when the claimant’s job disappears completely, or when an employee’s contractual hours are reduced without agreement. However, the situation on the ground can be confusing, as illustrated by the failure of Ms Welch to complete her claim form correctly.

It is suggested that this confusion may arise for two reasons. First, there will be no redundancy if the reduction of hours cannot be attributable to a reduction in the “requirements of that business for employees to carry out work of a particular kind”. The necessary causal connection is often more difficult to establish when hours are reduced than if a job disappears entirely. Secondly, a reduction in hours will not necessarily result in a dismissal, and without a dismissal no entitlement to a statutory redundancy payment can arise. For example the hours removed may not be contractual, or there may be disagreement over whether the employee has accepted a variation in the contract of employment, rather than resigning and claiming constructive dismissal.