Will redundancy be unfair if the employer didn’t consider furlough? 2 conflicting cases

Written on 11 August 2021

Despite being in its penultimate month, the fallout from the government’s furlough scheme is already playing out in Employment Tribunals. As well as cases of furlough fraud and employers misusing the scheme, we now have some insight into how a court will deal with employers who bypassed the scheme altogether and went down the redundancy route instead.

The purpose of the furlough scheme, of course, was to save ‘viable’ jobs. When it was first introduced in April 2020, many employers were left contemplating whether the funding would be enough to protect employment in the long term or whether it was simply prolonging the inevitable. In many cases, employers decided on the latter and let people go.

This was always to be a risky move. In any redundancy situation, employers are expected to consider all reasonable alternatives, which would arguably have included utilising the scheme. Because of this, former employees are now bringing their employers to court, arguing that they were unfairly dismissed while a potential lifeline was available.

Rather confusingly, two recent cases have reached different conclusions. While both first-instance decisions – so not legally binding – they have provided an interesting glimpse into how a Tribunal might approach redundancy dismissals in situations where, on the face of it, the furlough scheme could have been utilised instead.

Mhindurwa v Lovingangels Care Limited

Ms Mhindurwa worked for Lovingangels as a care assistant. Her role involved providing live-in care, which she did from October 2018 until February 2020, when the person she was caring for was admitted into hospital and subsequently moved into a care home.

As such, in May 2020, Ms Mhindurwa requested to be furloughed. However, Lovingangels refused, saying they “didn’t have a job for her”. She was later sent a letter explaining that she was at risk of redundancy as the company was unable to offer her any more live-in care positions due to coronavirus restrictions.

In June, the parties met via Zoom to try and move the situation forward. At the meeting, Ms Mhindurwa was informed that the only work available was domiciliary care. She declined, and when the parties failed to reach a resolution at a second meeting in July, she was told that there was no alternative to redundancy and given notice of dismissal.

Ms Mhindurwa appealed the decision, but this was rejected by the appeal manager. She subsequently brought a claim for unfair dismissal, arguing that she should have been furloughed instead.

The Tribunal accepted that the employer had dismissed Ms Mhindurwa because of redundancy, one of five potentially fair reasons for dismissal. However, the dismissal was nonetheless found to be unfair for two reasons.

First, the employer had failed to properly consider the availability of the Coronavirus Job Retention Scheme, something the Judge said would be expected of a “reasonable employer” in order to avoid redundancy. The Judge added that “this was exactly the type of situation that the furlough scheme envisaged” and that the employer “should have considered furloughing Ms Mhindurwa for a period of time to see whether live-in care work would be required in the near future, or whether there was other work she could do”.

To add insult to injury, the Tribunal found that Ms Mhindurwa’s appeal hadn’t been given genuine consideration. The appeal manager made no enquiries to determine for himself whether her complaints were substantiated and had been too quick to sign off the employer’s original decision.

"This case indicates that Tribunals may expect employers to consider furlough as one of the alternatives to redundancy. However, that’s not to say that any decision to dismiss while funding was available will be always be unfair – indeed, there are a number of legitimate reasons why a business might decide against furloughing its staff. Nevertheless, employers should be prepared to defend their decision, and it will help if this is supported by evidence."

James Tamm, Director of Legal Services

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Handley v Tatenhill Aviation Limited

In this case, a Tribunal came to a different conclusion, though on slightly different facts.

Mr Handley was one of two flying instructors working for Tatenhill Aviation Limited, a small private airfield. His job involved providing flying lessons and flight experiences to customers.

Shortly after the first lockdown was announced, Tatenhill decided to close, and Mr Handley agreed to be furloughed for a period of three weeks on the understanding that this was a temporary measure until he could return to work as normal.

Having struggled financially pre-pandemic, the company was now generating no income from flight training due to coronavirus restrictions. With no indication as to when the situation might improve, it began a redundancy process. Mr Handley was selected for redundancy and his employment was terminated in August 2020. 

Feeling that the employer had breached the terms of the furlough agreement, Mr Handley brought a claim for unfair dismissal. He also alleged that, when flight training resumed in July, he was kept on furlough and a self-employed instructor was brought in to cover him. As such, he argued that there was in fact work for him to do, and that the real reason he was dismissed was to save costs.

The Tribunal rejected this part of Mr Handley’s claim. It accepted that another employer may have opted to keep Mr Handley on furlough rather than make him redundant; however, the question wasn’t whether the Tribunal would have acted differently, but whether the employer’s decision fell within the band of reasonable responses.

In the judgment, The Judge commented: “It is for an employer, not the Employment Tribunal, to decide how to structure its business and whether to make redundancies. I accept the respondent’s evidence that it needed to cut costs irrespective of the furlough scheme, and that it wanted to use the furlough scheme to pay some of the costs of making the redundancy. The nation was in unprecedented uncertainty at the relevant time, and it is not for me to step into the shoes of the employer and substitute my view for that taken by the employer at the time. The decision to dismiss the claimant notwithstanding the existence of the furlough scheme does not, in my view, render the dismissal unfair.’

On Mr Handley’s other arguments, the Tribunal found no evidence to suggest that the claimant’s redundancy was part of a move towards using self-employed instructors in an attempt to save on costs.

Further, while the Tribunal found that the employer had failed to follow a fair procedure (it concluded that the decision to select the claimant for redundancy was made prior to the start of the consultation process), it held that this would not have changed the outcome in this case.

The Judge said: “The claimant himself told me in evidence that he would have chosen to retain had he been choosing who to make redundant. In light of this admission… there was in my view a 100% chance that the claimant would have been dismissed had a fair procedure been followed in selecting him for redundancy.”

"This case confirms that making an employee redundant rather than keeping them on furlough will not necessarily render the dismissal unfair.

The fundamental difference between these two cases is that, in the first case, the employer didn’t consider furlough before moving to redundancy. In the second, the employer did consider the scheme and even used it for a short while, but inevitably decided that this wasn’t going to be viable long term.

Therefore, while it is always wise to at least consider furlough as an alternative, whether to keep someone furloughed is a matter for businesses to decide. Provided the decision is within the range of reasonable responses, it is not for a Tribunal to “step into the shoes of the employer” and make a determination based on what they would have done in the circumstances.

Given the recent statistic that one in five firms are planning staff cuts as the furlough scheme winds down, employers should take note to avoid legal pitfalls."

James Tamm, Director of Legal Services

Get reassurance around redundancy

Redundancy is a particularly complex area of employment law and, as these cases highlight, the margin for error is high. Our experts can guide you through the steps needed to ensure a fair and compliant redundancy process so that you can approach the situation confidently and protect against claims. 

For peace of mind, call 0345 226 8393 or request your free consultation using the button below.

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