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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
What is the Place of Business?
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.........
What is the Place of Business?
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
Transferred Redundancy (or Bumping
– 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
Transferred Redundancy (or Bumping
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
Offer of Suitable Alternative Employment (cntd)
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
Offer of Suitable Alternative Employment (cntd)
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
Offer of Suitable Alternative Employment (cntd)
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
Italian Legislation: CIG
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
Italian Legislation: CIG
Mechanism Up to 80% of the salary of the employee
paid with public funds Maximum of 40 hours per week
Italian Legislation: CIG
Duration Ordinary “CIG”
Three months, to be extended up to 12 months
The period cannot be consecutive
Italian Legislation: CIG
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).
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