Laura Binnie

Under the Employment Rights Act 1996, there will be a redundancy dismissal where the requirements of a business for employees to carry out work of a particular kind have ceased or diminished, or are expected to cease or diminish (section 139). Although a reduction in headcount usually amounts to a redundancy, this will depend on the precise facts. For example, the statutory definition will not always be satisfied when an employee loses their role in the context of a business reorganisation. In the recent case of Ballerino v The Racecourse Association Ltd., the EAT ruled that an Employment Tribunal had not applied the statutory test correctly when considering the purported redundancy of an employee on maternity leave. 

Ms Ballerino was employed by the Racecourse Association as a financial accountant. Her role was home-based, working 40 days per year with additional days as agreed. Four months after starting work, Ms Ballerino went on maternity leave. During her absence, a new chief executive undertook a review, which led to the creation of a new full-time business and financial analyst role. This combined the duties of Ms Ballerino’s role with other, more strategic duties. Ms Ballerino was invited to apply for the new role but was simultaneously offered a draft settlement agreement to sign within five days. She did not apply for the new role and was dismissed, purportedly for redundancy. 

Ms Ballerino brought Employment Tribunal proceedings, claiming that the redundancy process had been a sham and that she had been subjected to sex and maternity discrimination. She also argued that the Business and Financial Analyst role amounted to a suitable alternative vacancy and that her employer was therefore required to offer it to her as an alternative to redundancy because she was on maternity leave.

The Employment Tribunal rejected Ms Ballerino’s claims. The Racecourse Association had provided an acceptable explanation for reorganising the business. In addition, the new post was not a suitable alternative vacancy because it was a very different role, focusing on business analysis rather than financial accounting, with different terms, for example, being full-time rather than 40 days a year and office-based rather than home-based. The Tribunal also accepted that the employer had not concocted the role in order to terminate Ms Ballerino’s employment because she was on maternity leave. 

Upholding Ms Ballerino’s appeal, the EAT has now ruled that the Tribunal failed to apply the correct legal test because it had moved straight to considering whether the new role was a suitable alternative without first determining whether there was a genuine redundancy situation at all. The fact that there had been a reorganisation and an additional requirement for different skills did not necessarily mean that the statutory test for a redundancy dismissal was satisfied. Specifically, the Tribunal had not asked itself whether the need for employees to carry out financial accounting work had ceased or diminished, or was expected to do so. The Tribunal had also failed to engage properly with the question of whether the redundancy was a sham, particularly given that there was insufficient documentation setting out the rationale for the new role. The EAT remitted the case to the same Tribunal for reconsideration. 

This decision illustrates that employers must be able to demonstrate that there is a genuine redundancy situation and that this is the reason for dismissal rather than anything else, such as an employee’s protected characteristic. An employee who is pregnant or on maternity leave must be offered any suitable available vacancy; otherwise the employer will be at risk of a finding of automatic unfair dismissal. A dismissal may also be unfair where there is a failure to carry out a fair and transparent procedure. Having a well-considered business case at the outset of a redundancy process is therefore key.