Welch -v- The Taxi Owners Association (Grangemouth) Ltd
An employee faced with a fundamental breach of contract may resign and claim that they have been constructively unfairly dismissed. The employer faced with the claim may be able to establish that there were fair grounds for the ‘dismissal’. However, could an employee who resigns when her hours are unilaterally cut, be ‘redundant’ for the purposes of being entitled to a redundancy payment? This was the issue in the case of Welch -v- The Taxi Owners Association (Grangemouth) Ltd.
Miss Welch was employed as a radio operator and worked a 36 hour week for a taxi firm. Due to two other taxi firms commencing business in the same area, there was a considerable downturn in the work that came in during her shifts.
In response, the firm decided to divert calls direct to the taxi owners during these quieter periods. This meant that Miss Welch could only be guaranteed 26 hours work per week. She volunteered for redundancy but was told that the firm wanted her to continue in work. She resigned and claimed constructive unfair dismissal on the grounds of the changes to her hours of work.
The Employment Appeal Tribunal held that the firm had genuine business reasons for making these changes which amounted to ‘some other substantial reason’ sufficient to defeat her unfair dismissal claim. Importantly, it rejected arguments that the employee could be entitled to a redundancy payment in these circumstances. It observed that, if a redundancy route had been taken, the employer would have selected an employee for dismissal rather than simply changing their hours of work and there was no certainty it would have been Miss Welch who was selected. In any event, an entitlement to redundancy pay only arose where an employee had been dismissed on grounds of redundancy, not where an employee resigned in response to a fundamental breach of contract.
Comment: In the recent Packman v Fauchon case which we mentioned in last month’s bulletin, it was held that a redundancy situation arose where an employee was dismissed in circumstances where the employer wished to reduce the employee’s hours of work.
However, this decision clearly questions whether there is a redundancy situation in those same circumstances and controversially concludes that a redundancy entitlement will simply not arise where the employee is not dismissed but resigns in response to changes. Therefore, could this mean an employer who breaches the contract is in a better position insofar as there will be no right to claim a redundancy payment? Unfortunately, these conflicting approaches to redundancy are only likely to increase the uncertainty regarding an employer’s obligations in the course of a reorganisation.
As we said last month – if you are downsizing or reorganising and require some help please get in touch and seek professional advice in advance – getting it wrong could lead to all sorts of issues.