large scale dismissals

With dismissal notices being given out by Shropshire Council to all their staff earlier this month, we thought we’d take a closer look at what this means and if it could happen more frequently in the current climate.

Several news outlets ran the story in early July that Conservative-led Shropshire Council had handed redundancy notices to its 6,500 strong workforce, informing them that their employment would be terminated on 30th September 2011 but they would be immediately re-hired on 1st October if they agreed to a 5.4% pay cut. The Council said this would eventually reduce its staffing bill by £7 million per year and was preferable to the alternative of large-scale redundancies.

This decision followed a 90-day consultation period with staff and Trade Unions that failed to reach an agreement.  The Consultation period also sought views on working hours, standby / allowance / call-out /overtime rates.  As well as the pay cut, current staff are being asked to accept a reduction in sick pay rates and a change in annual leave entitlement plus in addition there is a 2-year public sector pay freeze in place.  We understand that weekly working hours will be reduced too, from 37 to 35 hours per week (equalling the pay deduction), but we have been unable to confirm if this is correct.

The Union UNISON reacted angrily (with approximately 40% of Council staff Unison members) describing it as a “terrible way to conduct industrial relations” and are considering balloting for Strike Action, while the Council hope they can continue to reach an agreement with the Union before the dismissal date.  UNISON are currently advising their members to write to the Council refusing the new contracts.

Unfortunately there was some mis-reporting of the news story in the sense that this was described as mass–‘redundancies’.  It will be a mass dismissal but it will not be a redundancy situation as the staffs’ jobs will still exist on and after the date of dismissal. The Council have described their action as ‘dismissal and re-engagement’.  This is an important distinction because it means that if staff do not accept the new contracts they will be dismissed and they will not be entitled to any compensation pay.

The Council are using a legally valid fair ‘reason’ for dismissal that is called ‘Some Other Substantial Reason’ (SOSR) from the Employment Rights Act of 1996 – see our Guide here to ‘How Your Employment can come to an End‘ for more information and our Guide to Changing Terms in your Contract.

However using this SOSR ‘reason’ can be fraught with difficulties and several Legal experts have said that while it can be used to change employees terms and conditions legally (and in other dismissal situations), it can leave Employers open to unfair dismissal claims by staff, even if they offer re-employment; plus this type of action is genuinely considered bad practice with the very negative impact it has on staff morale.  The Employer would need to show genuine and good business reasons for their actions, and that they have followed a fair dismissal process and also that there were able to offer genuine alternatives to the dismissals and acted reasonably to successfully defend an unfair dismissal claim in these circumstances. – the attitude of the employees and the unions will also be relevant in determining, at Employment Tribunal, whether this type of dismissal could be seen as fair or not.

As more news on this story arrives we will update this post!