Two recent cases demonstrate that the employment tribunal will examine whether the employer has considered furlough when determining whether an employee's redundancy is unfair.
We examine both cases in detail below, as well as outlining the implications for employers.
Mhindurwa v Lovingangels Care Ltd
This recent employment tribunal case concerned a live-in care assistant, Ms Mhindurwa.
Her client had moved to a care home, meaning her role was no longer required by the business.
Her request to be placed on furlough in May 2020 was denied by her employer because "there was no work for her".
Ms Mhindurwa was made redundant in July 2020, as no live-in care work could be offered to her due to Covid-19 restrictions, and she refused to take on a domiciliary role instead.
She subsequently brought a claim for unfair dismissal, arguing that she should have been placed on furlough instead of being dismissed.
The Employment Tribunal upheld Ms Mhindurwa's unfair dismissal claim on the basis that a reasonable employer would have considered furlough as an alternative to redundancy in the circumstances.
The Judge held that the redundancy was genuine in that there was no longer any work available for Ms Mhindurwa.
However, her dismissal was unfair because her employer did not contemplate furloughing her to see if any live-in care work would become available again when the scheme's purpose is to prevent redundancies arising from Covid-19.
Since the employer could not provide any justification for refusing Ms Mhindurwa's furlough request, its decision to dismiss was not deemed reasonable in the circumstances.
Handley v Tatenhill Aviation Ltd
The claimant, Mr Handley, was a flying instructor for a small private airfield who had been placed on furlough in April 2020 and was subsequently made redundant in August 2020.
He brought a claim of unfair dismissal on the basis that he could not be made redundant under his furlough agreement, which stated it would last "for a period of up to 3 weeks initially or until you can return to work as normal."
Although the Employment Tribunal upheld Mr Handley's unfair dismissal claim for other reasons, the employer's decision to make him redundant whilst furlough was still available was not unfair.
When determining whether or not a dismissal is fair, the tribunal must objectively decide whether dismissal falls within the 'range of reasonable responses'.
A dismissal will be within the range of reasonable responses if a reasonable employer would also see dismissal as an appropriate option in the circumstances, regardless of whether the tribunal believes that dismissal was the right decision.
Therefore, in this case, it did not matter that other employers may have kept Mr Handley on furlough for longer, as it was reasonable to consider dismissal in the circumstances.
The key difference between the facts of this case and Ms Mhindurwa's case was that Tatenhill Aviation Limited had encountered financial difficulties before the onset of the pandemic.
The business area in which Mr Handley worked had no revenue, and it was unlikely that work would pick up at any time in the foreseeable future, making his redundancy inevitable.
The company needed to reduce overheads as much as possible, so the tribunal held it was fair for them to make Mr Handley redundant whilst the furlough scheme was still available as this enabled them to recover his notice pay.
What do these cases mean for employers?
Although both cases are first instance decisions only and therefore not legally binding precedent, they demonstrate that the tribunal may expect employers to consider furlough as an alternative to redundancy.
There isn’t a default obligation to furlough staff as an alternative to redundancy, and failing to furlough won’t automatically render any subsequent redundancy dismissal unfair, however, each case will be assessed on its merits as to what is appropriate in the circumstances.
Therefore, an employer must be able to demonstrate why furlough was not an option for avoiding, or at least delaying the need for redundancies.
The issue in Mhindurwa v Lovingangels Care was that the employer could not provide any explanation for their conclusion that furlough was not feasible as an alternative to redundancy in the circumstances.
It will ultimately be a business decision as to whether it is appropriate to use the furlough scheme to delay and potentially avoid an employee's redundancy.
Therefore, the redundancy will not be unfair if you can illustrate valid reasons why furlough was not an appropriate alternative in the circumstances.
Such reasons could include:
- Additional costs associated with furlough, e.g. accrued holiday, national insurance and pension contributions and the requirement for employers to top up an employee's furlough pay
- Increased dismissal costs from delaying redundancy, e.g. if the employee would be entitled to a much more generous redundancy package.
Best practice advice
If you contemplate making redundancies before the furlough scheme ends on 30 September 2021, you should consider furlough as a potential alternative to redundancy.
It is essential to keep a paper trail so that you can provide evidence of your decision-making process to the tribunal in the event of resulting unfair dismissal claims.