Could a failure to furlough make a redundancy unfair?
This question has been on our lips for some time but, with a huge backlog in the employment tribunal system, we are seeing long delays before many of the pandemic-related claims are heard.
Many businesses have made use of the furlough scheme to keep staff in employment over the last 18 months and some employees have actively sought to be ‘furloughed’ rather than be made redundant. The question of whether employers should be expected to use the furlough scheme, in response to pressures brought by lockdown, has been posed extensively and only now is the answer starting to emerge from the tribunals. And it’s far from a straightforward ‘yes’ or ‘no’.
Two recent employment tribunal judgments concern claims for unfair dismissal, made on the basis that the employers in question failed to make full and proper use of the furlough scheme before deciding to make them redundant.
In short, the answer so far is: a failure to furlough on its own won’t be enough to make a dismissal unfair, but a failure to consider it as an option before dismissing someone might make it unfair. The tribunal decisions also remind us that it’s equally important to pay attention to the fundamental reason for making someone redundant and also to carry out a fair process.
This does not mean that all businesses which decided to make roles redundant should be concerned about unfair dismissal claims. It does tell us that tribunals are likely to ask whether they gave due consideration to furloughing that member of staff as an option, even if only to delay an inevitable redundancy. The furlough scheme remains open until 30 September 2021 and therefore any employers considering making redundancies before this date may wish to factor this in to their decision-making.
In the case of Handley v Tatenhill Aviation Limited a flying instructor was furloughed by the private airfield which employed him during the pandemic. Shortly afterwards, Mr Handley was told his role was redundant and he brought a claim for unfair dismissal against the airfield. One of his key grounds was that he should have been kept on furlough instead of being dismissed for redundancy.
The Employment Tribunal disagreed with him on this point, concluding “Whilst another employer may have taken a different approach and chosen to leave the claimant on furlough for longer, it cannot be said that it was unfair … not to do so.” The tribunal accepted that at that time it had not been clear for how long the furlough scheme would last and that, by giving him his notice sooner and whilst still on furlough, the airfield had saved the cost of paying all of the notice pay themselves. The tribunal accepted the flight school’s evidence that it needed to cut costs, irrespective of the furlough scheme, and it had shown very clear figures that it was making a loss year-on-year and would struggle to pay wages. For these reasons, the tribunal also accepted that the redundancy was genuine.
In summary, the airfield had considered furlough, had tried it, and it had not been enough to offset its losses so redundancy was the only option. This was fair, the tribunal found.
Despite clearing those hurdles, the flight school did encounter some turbulence. The tribunal found that Mr Handley’s dismissal was procedurally unfair because the flight school had made the decision to select him for redundancy before starting any consultation process with him. Additionally, the manager who made the decision to dismiss him had also handled the appeal and upheld his own decision. This can be unavoidable in small organisations, but it is a useful reminder that the tribunal will consider this in the context of overall fairness. In this case, it was found not to have impacted the overall outcome and Mr Handley was not awarded any compensation.
By contrast, in the case of Mhindurwa v Lovingangels Care Limited, a failure to furlough was found to be unfair. Mrs Mhindurwa was a ‘live-in’ care assistant. In May 2020 her employer, Lovingangels Care Limited, stated that it was no longer able to offer her live-in care work and that her role was at risk of redundancy. Mrs Mhindurwa invited Lovingangels to furlough her. However, it refused her request on the basis that they had no live-in care work and Mrs Mhindurwa refused to do the alternative work available to her. Lovingangels proceeded with the redundancy process and dismissed her.
Mrs Mhindurwa’s dismissal was found to be unfair because Lovingangels did not consider placing her on furlough, despite her request to do so, and it failed to provide any clear explanation for this. They did not satisfy the tribunal as to why it would not have been appropriate to furlough her, or why they failed to consider this. In particular, Lovingangels’ explanation that they dismissed her because they did not have any immediate work for her drew criticism from the Employment Judge, who pointed out that this was precisely the sort of eventuality that the furlough scheme was intended to address.
Mrs Mhindurwa’s dismissal was also found to be unfair due to the way her appeal against her dismissal was conducted; the tribunal said it was just a ‘rubberstamp of what had gone before’.
Key take-aways for employers:
- While the furlough scheme remains open, employers contemplating making redundancies should consider whether placing staff on furlough is an option. Using the furlough scheme is not obligatory, but a failure to consider it at all may well be unfair.
- Employers experiencing a temporary shortage of work, or who are unsure what the future holds for their business but remain optimistic about the long-term, may wish to access the scheme now and review their position towards the end of the scheme.
- If an employer deems it inappropriate to place someone on furlough and appropriate to proceed with a redundancy process, it should clearly document to reasons why and explain these reasons to the member of staff.
- A reminder that appeal managers should not simply ‘rubber-stamp’ decisions at the appeal stage. They should exercise their own judgement and make further enquiries or consider whether further investigation is necessary to establish whether a point of appeal is well-founded and could overturn a dismissal.