The EAT has given some much welcomed guidance on the question of whether a reduction in hours as opposed to a reduction in headcount can amount to a redundancy in the case of Packman t/a Packman Lucas Associates v Fauchon.
Prior to this case, there had been conflicting authority on whether a reduction in hours could, of itself, amount to a redundancy situation. In the above case, the employee was employed as a bookkeeper. Following a downturn in work and the introduction of new accountancy software, there was a reduction in bookkeeping work. The employer sought a significant reduction in the employee’s hours of work, and when she refused to agree, dismissed her. The employer argued that as there was no reduction in headcount in the business a redundancy situation did not exist and so they were no liable to make a redundancy payment to the employee. In saying this, the employer relied on a previous EAT decision that said for a redundancy situation to arise, there must be a reduction in headcount not simply a reduction in hours.
The EAT in this case decided that the previous decisions were wrongly decided and found that a substantial reduction in hours could amount to a redundancy situation and the employee in this case was entitled to a redundancy payment.
This decision clears up an area of the law that has been unclear for some time. It remains to be seen precisely what will and will not constitute a ‘substantial’ reduction in hours and so trigger a redundancy situation, but in the meantime, employers should be alive to the fact that an employee who will not agree a reduction in hours may well be entitled to a redundancy payment.