Welch v Taxi Owners Association (Grangemouth) Ltd EATS/0001/12
constructive dismissal | variation of terms and conditions | unfair dismissal | redundancy
In holding that an employer did not fundamentally breach an employee’s contract by failing to make her redundant, the Employment Appeal Tribunal (EAT) has suggested that a redundancy situation will not arise where there is only a diminution in an employer’s need for particular work to be carried out, rather than a reduction in the number of employees required to do that work.
Implications for employers
- Although the EAT in Welch has suggested that there will be no redundancy situation where there is only a diminution in work, and not in the employees required to carry out that work, employers should be wary of relying on this interpretation in practice.
- This is partly because the EAT’s discussion on what constitutes a redundancy situation was not central to its decision, given that the case turned on whether or not Miss Welch had been constructively dismissed.
- The other reason is that the case conflicts with the earlier case of Packman, in which the issue of whether or not a diminution in work (and not in the employees required to do it) can give rise to a redundancy situation was central to the EAT decision.
- Given the apparent conflict, it seems likely that one or both cases will proceed to the Court of Appeal, which would need to decide which interpretation of the statutory test is correct.
Miss Welch was employed by Taxi Owners Association (Grangemouth) Ltd as a radio controller, working 36 hours per week on night shifts. There were seven other radio controllers, including one who also worked nights. In early 2011, due to a downturn in business caused by a new competitor, the company sought to save costs by reducing the number of hours worked by its radio controllers.
The company initially proposed reducing Miss Welch’s hours to 14 per week but, after discussions, amended its proposal to her working 28 hours per week for six weeks, with a commitment to reviewing the situation thereafter. Miss Welch had been asking to be made redundant, and rejected the company’s proposal. She resigned on 2 April 2011, for the reason that the company was seeking to impose a variation to her contractual hours to which she did not consent, and claimed constructive dismissal.
Miss Welch’s ET1 did not include a claim for a redundancy payment or any allegation that she had been made redundant, although, at the employment tribunal hearing, her approach was that the company “should have asked whether this was truly a redundancy situation”. The tribunal noted that the issue of redundancy “loomed large” in the case, finding that Miss Welch had, on the basis of “erroneous advice”, formed the view that she was entitled to be made redundant.
The tribunal held, however, that there was no redundancy situation, because the company’s requirements for radio controllers had neither ceased nor diminished at the relevant time - the only thing that had changed was the amount of hours that the company needed Miss Welch (and others) to work. The tribunal held that the dismissal was fair for “some other substantial reason”, accepting that the company had fundamentally breached Miss Welch’s contract by its proposed reduction to her working hours, but finding that it had had genuine business reasons for doing so.
Miss Welch appealed to the EAT on the basis that the company ought to have dismissed her as redundant and was in fundamental breach of contract by not having done so. She argued that the proposed change to her working hours was due to a redundancy situation created by the diminution in the employer’s night-shift business. The company argued that it would be “crazy to punish [it]” for having failed to make Miss Welch redundant.
The EAT agreed with the tribunal decision that the key issue in the case had “nothing to do with redundancy” but, given Miss Welch’s arguments, dealt with the relevant law. It cited Safeway Stores plc v Burrell  IRLR 200 EAT, which had been “approved and endorsed” by the House of Lords in Murray and another v Foyle Meats Ltd  ICR 827, as authority that the relevant issue in determining a redundancy situation is whether or not there is a diminution or cessation in the employer’s requirement for employees to carry out the work in question, rather than merely a diminution in the work itself.
The EAT’s statement of the law in the present case directly conflicts with Packman t/a Packman Lucas Associates v Fauchon EAT/0017/12, which was heard a month earlier. In Packman, the President of the EAT held that the tribunal had been correct to find that an employee who was dismissed after refusing to accept reduced hours following a downturn in business was redundant, even though there was no reduction in the overall number of employees required.
In the present case, however, the EAT held that its discussion on whether or not there was a redundancy situation was irrelevant, as Miss Welch was not dismissed as redundant by the company. Further, the EAT found it “very difficult” to accept that an employer can, in principle, be in fundamental breach of contract by not dismissing an employee (whether for redundancy or some other reason). There had been no evidence at the tribunal hearing as to what would have happened if the company had gone down the redundancy route, and the tribunal had found that the reason for Miss Welch’s resignation was not that the company had failed to dismiss her or had refused to make her redundant. The EAT dismissed Miss Welch’s appeal.
- Get more information on redundancy issues in the XpertHR FAQs section, which answers the following questions:
- How to change the terms of existing employment contracts The employer in Welch acted lawfully in proposing contractual changes that were justified by a genuine business need. Make sure you do the same with our "how to" guide.
Case transcript of Welch v the Taxi Owners Association (Grangemouth) Ltd (on the BAILII website)