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-throughFriday
 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).