We have an employee who has been made redundant and was invited to apply for another role with us (rather than simply being offered the role). Can they still claim a statutory redundancy payment if they decide not to apply?

An employee with at least two years’ continuous employment is entitled to a redundancy payment when they are dismissed by reason of redundancy. It will be a question of fact whether, in the circumstances, an employee has been dismissed (and whether by reason of redundancy).

There are specific situations in which an employee is considered not to have been dismissed, such as when suitable alternative employment is offered within a particular time frame and accepted.

Assuming that the dismissal is by reason of redundancy:

  • if the employee’s contract of employment is renewed either immediately or within four weeks of the dismissal, then the dismissal is deemed never to have happened—if there is no dismissal, there is no right to a redundancy payment.
  • if the employee is re-engaged under a new contract of employment either immediately or within four weeks of the dismissal, then, provided that the offer of a new contract was made before the old contract was terminated, the dismissal is again deemed never to have happened. Correspondingly, there is no right to a redundancy payment

In either of these situations, unless the terms and conditions of the renewal or re-engagement are identical to the previous terms and conditions, the employee is entitled to a statutory trial period of at least four weeks, without prejudice to their redundancy rights.

If the employee refuses the offer of a new or renewed contract, then the dismissal stands but the employee loses their right to a redundancy payment if the following conditions are satisfied:

  • the offer was made before the old contract was terminated.
  • the renewal or re-engagement is to take effect immediately upon the termination of the employee’s employment under the old contract or within four weeks thereafter.
  • the job offered is the same as the old job or else constitutes suitable alternative employment in relation to the employee.
  • the employee unreasonably refuses the offer

In relation to what validly constitutes an ‘offer’ for the purposes of the statutory scheme:

  • the offer need not precisely specify the date on which the new employment is to begin, but the dismissal ‘vanishes’ only if the new employment actually begins within four weeks of the old.
  • the offer of renewal or re-engagement must be real and not a sham, in the sense that it must be an offer which the employer reasonably expects to be able to fulfil.
  • the offer may be written or oral.
  • the offer has to be one which is specific enough to be capable of acceptance.
  • the offer need not be addressed to each employee individually, but it may be made collectively, e.g. by posting a notice on the firm’s noticeboard. In that event, however, it is for the employer to prove as a fact that the offer was effectively communicated to the employee in question.

It will be a question of fact whether an offer was made at all. An employee can only be at risk of losing the right to a redundancy payment for unreasonably refusing an offer of re-employment, if the employer has actually made a proper offer of further employment in the first place.

It is unlikely that a general invitation to an employee to apply for a vacancy, without more, would equate to an offer of new or renewed employment for the purposes of the statutory scheme. It follows that a failure to apply for such a vacancy is unlikely to amount to a refusal of an offer of renewal of re-engagement.

As always, this advice is general in nature and will need to be tailored to any one particular situation. As an RMI member you have access to the RMI Legal advice line, as well as a number of industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.

Motor Industry Legal Services

Motor Industry Legal Services (MILS Legal Ltd) provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only law firm in the UK which specialises in motor law and motor trade law. MILS currently advises over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.