In Martland v Co-operative Insurance Society Ltd., the Employment Appeal Tribunal (EAT) considered the question of whether employees who had been dismissed and then refused the new terms and conditions offered to them were redundant and therefore entitled to redundancy payments.
The claimants worked as ‘Financial Advisors’ (FAs) for the Co-operative Insurance Society (CIS). They had previously been called ‘agents/collectors’ and a traditional feature of CIS was that its agents provided advice to and collected premiums from its customers in their own homes. Faced with severe financial difficulties however, CIS decided to transform its entire operation, which involved improving the productivity of the FAs by having them spend more time procuring sales and less time with existing customers for non-selling purposes. To this end, CIS sought to achieve union agreement to changes in the FAs terms and conditions of employment. When this failed, it terminated their contracts and offered them new ones on different terms.
For the purposes of the Employment Rights Act, an employee is regarded as having been dismissed by reason of redundancy if the main reason for the dismissal is that the business no longer has a need for employees to carry out ‘work of a particular kind’.
The Employment Tribunal (ET) examined whether the new terms and conditions offered to the FAs required that they carry out work of a particular kind that was different from the work performed under their original contracts. If it did, then the dismissals were by reason of redundancy.
The ET held that the dismissals were not by reason of redundancy but because of a reorganisation. They were therefore for ‘some other substantial reason’ and thereby fair. The FAs had essentially been employed as salespersons and whilst the reorganisation meant that the techniques used might be different, the bulk of the selling would still be undertaken by them. The EAT dismissed their appeal. There was no single right or wrong answer to the question whether or not the work under the new terms and conditions could be described as being of a different kind. The judgment involved assessing all the evidence. The ET was entitled to reach the decision it had and had given clear reasons for so doing.
As regards the entitlement to redundancy payments, the FAs had claimed that they were entitled to an enhanced contractual redundancy payment, well in excess of the statutory amount, as provided for under a collective agreement. Their contracts of employment provided for terms agreed in the course of collective negotiations to form part of the contract. However, whilst containing precise details of the ‘severance terms’, the collective agreement stated that ‘this process is not intended to form part of individual contracts of employment’.
The ET held that had the dismissals been by reason of redundancy, the FAs would have been entitled to the enhanced payments. CIS cross-appealed this finding. In the EAT’s opinion, ‘where there is a term which is manifestly apt for incorporation into the individual contract, as the redundancy severance terms were, then it would require very clear and unambiguous language to deny it contractual effect’. The unions and employees would have expected the negotiated terms of the agreement to be met in the event of redundancy and the EAT judged that there would have been an obligation to make the enhanced payments.
For advice on changing the terms and conditions of employee contracts or on any aspect of redundancy, contact us.