EMPLOYMENT (AMENDMENT NO.5) (JERSEY) LAW 2003
REDUNDANCY
ACCOMPANYING REPORT
INTRODUCTION
The purpose of this Proposition is to amend the Employment (Jersey) Law 2003 to make provision for the protection of employees in redundancy situations by inserting a new part into that Law.
The previous Social Security Minister asked the Employment Forum to consult on Phase two of the employment legislation programme in 2007. The Forum started by consulting on two issues in tandem; redundancy and transfers of undertakings, as elements of the provisions are based on similar principles (consulting with employees).
The Minister proposes the draft amendment on the basis of the Forum’s recommendations relating to redundancy and intends to propose legislation relating to transfers of undertakings later in 2009.
This proposition accords with the States Strategic Plan (2006 to 2011), which commits to establishing basic rights and equal opportunities for all sectors of society by extending legislation to “provide a comprehensive range of basic rights to employees and employers by moving into the second phase of employment reform, as approved by the States.”
BACKGROUND
Following public consultation during 2006, the Employment Forum issued the Social Security Minister with its recommendations on 16 February 2007[1].
The Minister issued his response to the Forum’s recommendations as a Report to the States on 26 April 2007 (R.C.43/2007) and the draft amendment has been prepared on that basis. The majority of the Forum’s recommendations were accepted, however based on advice received during the preparation of the draft amendment, there are a number of differences from the recommendations.
Subject to the States adopting the amendment, it is anticipated that the amendment would come into to force towards the end of 2009, or early 2010. Whilst the passage of the draft law through Privy Council may take six to nine months, this period will be important in order to give employers sufficient notice to prepare for the introduction of the legislation, particularly as the new rights may result in an additional cost to employers. A notice period such as this is also essential for the publication of guidelines to raise employee and employer awareness of the provisions; the development of training (e.g. by the Jersey Advisory and Conciliation Service); as well as preparing the Jersey Employment Tribuanl to adjudicate under the new legislation.
Previous Consultation
The former Employment and Social Security Committee issued a consultation paper, “Fair Play in the Workplace” in November 1998. This was the Committee’s first consultation on employment legislation that was widely circulated and debated publicly.
Eight out of ten respondents to that consultation supported the right of workers to receive redundancy payments and three quarters of respondents felt that employee’s rights should be protected following the transfer of an undertaking.
Having considered the responses to that consultation, the former Committee submitted a Report and Proposition (P.99/2000) to the States proposing a two phased approach to the introduction of employment rights. The States approved the proposition to develop measures as may be necessary in Phase 2 to deal with the issues of redundancy and the protection of employees involved in business mergers and acquisitions.
The former Committee’s proposition noted that demand for labour was high at that time, however recognised that the situation might not continue and that genuine hardship can result when jobs are lost in industries where there is little or no further demand for those skills, for example due to economic decline, outsourcing, business rationalisations, increased competition, or population polices. It was therefore felt that provisions should be introduced to provide for employees who are made redundant.
Employment Forum Consultation
During the period June to August 2006, the Forum consulted about the proposal to introduce legislation in Jersey relating to redundancy and business transfers by circulating a questionnaire to its database of approximately 150 employers, employees, trade unions, employer associations, as well as other interested parties, groups and stakeholders. Twenty four responses were received representing the range of respondent types, including the main stakeholders. On the basis of the responses received, the Forum issued a detailed recommendation to the Minister in February 2007.
REDUNDANCY LEGISLATION IN OTHER JURISDICTIONS
The UK
Entitlement to statutory redundancy pay was one of the early aspects of employment legislation in the UK with the introduction of the 1965 Redundancy Payments Act. Payments were originally funded largely by the Government. A redundancy payments scheme is now provided under the Employment Rights Act (1996) which provides that employees with more than 2 years’ service, from any age, may claim a redundancy payment.
UK redundancy payments are calculated by counting the years of continuous employment and awards are banded by age within that range;
Up to age 21, half a week’s pay for each full year of continuous service
Age 22 to 40, one week’s pay for each full year of continuous service
Age 41 +, one and a half week’s pay for each full year of continuous service.
The maximum earnings for the purpose of the payment is £350 per week (as of 1 February 2009) and a maximum of 20 years service, irrespective of age, may be taken into account. This means that a UK redundancy payment can be a maximum of £10,500.
Isle of Man
The 1990 Redundancy Payments Act provides the right to a redundancy payment. The qualifying criteria and method of calculation for redundancy payments are very similar to the UK; however there is no age related scale in the Isle of Man; until the age of 65 redundant employees are entitled to one week’s pay for every full year of continuous service. The weekly earnings payable are capped; however the cap is higher than the UK at £420.
Guernsey
There are no statutory provisions in Guernsey requiring employers to pay employees a redundancy payment or to notify employees that redundancies may occur.
Other jurisdictions
Some countries do not provide any statutory redundancy payments, including Denmark, Finland, Greece, Norway, Spain and Sweden, although collective agreements provide redundancy payments in some cases. In the countries that do provide statutory redundancy payments, the amount of redundancy pay varies greatly and tends to be related to the employee’s length of service.
Redundancy payments in France, Germany, Italy, Luxembourg and the Netherlands are considered to be generous, whereas payments in Belgium, Ireland and the UK are considered to be less generous. Most provide a lump sum payment, but others, including Belgium and Italy, provide a monthly allowance for a specified number of months following the redundancy. The financing of payments varies also; in most countries employers are responsible by law for paying compensation payments, however some countries have set up central funds.
THE DRAFT EMPLYOMENT (AMENDMENT NO.5) (JERSEY) LAW 200-
The following sections provide details of the provisions proposed in the draft amendment.
Qualifying for a redundancy payment
Under this Proposition, employees who have at least two years’ continuous employment will be entitled to a redundancy payment of one week’s pay for every year of employment with that employer.
The continuous service requirement is significantly longer than that required to qualify for protection against unfair dismissal because the purpose of redundancy payments is different from protection against unfair dismissal; it compensates employees for loss of job security where they have remained in employment for such a period of time that justifies them having a stake in it.
The right applies irrespective of hours worked per week. An employee working less than eight hours per week would receive a proportionate (and probably small) redundancy payment. Under future sex discrimination legislation, to exclude people working less than eight hours per week is likely to be indirectly discriminatory to female employees who are more likely than men to work less than eight hours per week.
Calculating the redundancy payment
The Employment Forum had recommended to the previous Social Security Minister in February 2007 that a week’s pay (as defined in Schedule 1 of the Employment Law) should be uncapped for the purpose of the redundancy award. The Forum considered that “an uncapped amount is straightforward and will reward all employees accordingly, proportionate to what they have earned.”[2]
The Forum did however note that “there is the danger that if the redundancy payment is set too high, employers will not be able to afford to stay in business at all, and more jobs may be lost.” The current Social Security Minister considers that the Forum would have been bound to take into account the current recession if it were making its recommendation for redundancy payments in 2009. Caution is vital in the current economy.
The draft amendment therefore continues to provide that a redundancy payment is calculated in accordance with the definition of a week’s pay, as set out in Schedule 1 of the Employment Law, however it is also subject to a maximum weekly amount. The intention is to prevent further business collapse which could jeopardise the jobs of employees that may remain due to employers potentially having to make huge payouts in times that are already economically difficult.
The maximum amount of one week’s pay is the reported weekly average earnings (for full time equivalent employees), as quoted in the Statistics Unit’s June Average Earnings Report (released in August each year). The relevant figure for each redundancy will be the most recent figure published at least one month before the effective date of termination of employment. The amendment also provides that the Minister may make an Order setting a different maximum weekly amount; however it is intended this provision would only be used if necessary in future, and with sufficient notice to employers of any proposed change in the maximum weekly figure.
Based on the current weekly earnings figure of £600, the cap will continue to protect the long serving low and middle earners and will compare favourably with the maximum weekly pay that applies in the UK and Isle of Man. In the UK, a week’s pay for the purpose of the redundancy payment is capped at £350 and in the Isle of Man the weekly payment is capped at £420.
Jersey’s phased introduction of employment legislation provides minimum standards in employment rights. Employers may then build upon these rights contractually, and further legislation can develop and improve upon at an appropriate pace for a small jurisdiction so as not to be onerous, particularly to the small local employer.
The Employment (Awards) (Jersey) Order 2005 will be amended at the appropriate time to enable the Employment Tribunal to award the redundancy payment.
Tribunal Time Limits
No time limit applies with respect to an employees’ right to claim a redundancy payment, provided that at least one of the following four events has occurred in the six months following the effective date of termination of employment;
– The payment is agreed and paid
– The employee makes a written claim for the payment to the employer
– The employee refers the claim to the Employment Tribunal
– The employee makes a claim of unfair dismissal to the Tribunal
If an employee has made a claim in writing to the employer within six months and subsequently the amount is disputed, the employee can present a claim to the Tribunal at any time; there is no time limit.
If an employee fails to make a written claim, or apply to the Tribunal within six months, they may lose the right to a payment. However, if during a further period of six months, the employee makes a written claim to the employer, refers a redundancy claim to the Tribunal, or presents an unfair dismissal complaint to the Tribunal, the Tribunal has the discretion to award a redundancy payment, if it considers it just and equitable to do so.
A strict time limit on redundancy claims would unnecessarily force all redundant employees to make a claim to the Tribunal as a matter of precaution, regardless of any progress the employee may be making in negotiations with their employer. Redundancy is not like the other sorts of claims made to the Tribunal where the nature of the claim necessarily involves a dispute between the employer and the employee, such as unfair dismissal which has an eight week time limit for Tribunal applications. The same procedure in respect of the time limit for redundancy payment rights is applied in the UK and Isle of Man.
Alternative work
This right to a redundancy payment does not apply if the employee has unreasonably refused an offer of the same or other suitable employment to start within four weeks of termination of employment, or the employee has unreasonably terminated such new employment within four weeks of starting work (or such longer period as agreed).
Reasonableness and suitability will be determined by the Tribunal, for example, whether similar terms and conditions of employment apply, including hours, location and remuneration.
Unless the new terms and conditions of employment are identical to the previous terms and conditions, employees will be allowed a trial period (to include any retraining) of four weeks, which may be reviewed and extended for a further period as necessary where the employer and employee both agree. Employees would continue to be entitled to redundancy pay if they “reasonably” refused the alternative employment at any time during the trial period.
Consultation Requirements
Good practice requires employers to consult with employees regarding redundancies at the earliest opportunity. It is vital that the employer uses a fair system of redundancy selection to avoid complaints of unfair dismissal. Case law[3] shows that the Tribunal will take the matter of individual consultation into account as one of the four ordinary principles of fairness. shows that the Tribunal will take the matter of individual consultation into account as one of the four ordinary principles of fairness.
Further to this, the amendment will require employers to consult with employees collectively where 21 or more redundancies are proposed in a 90 day period, and that consultation must begin at least 30 days before the first dismissal is due to take effect.
Where a registered trade union is recognised by the employer, representatives of that union will represent employees in collective consultation. Where a union is not recognised, representatives from within the establishment may be nominated and elected by the employees for the purpose of taking part in consultation about redundancies on their behalf. This may include representatives of trade unions or staff associations that are not recognised by the employer for collective bargaining purposes. Where elections fail, the employer must provide the required information to all employees individually.
As with the rights provided for employee representatives in disciplinary and grievance hearings (Part 7A of the Employment Law), employee representatives will have the right to a reasonable period of paid time off work to represent employees and will be protected against detriment or dismissal on the grounds of any actions taken as a representative (or in elections to act as a representative).
Where an employer has failed to engage in meaningful consultation, the Tribunal may order the employer to pay each affected employee one week’s pay (as defined in Schedule 1 of the Employment Law) for each week of the protected period, up to 13 weeks. When considering making a protective award to employees, the Tribunal may take into account whether that employer took such steps as were reasonably practicable in the particular circumstances, including the seriousness and deliberateness of the employer’s failure to consult. The purpose of the award is to provide a sanction, not compensation for losses suffered.
Time off to look for work
An employee who is under notice of redundancy will have the right to a reasonable period of paid time off work, equivalent to at least two normal working days. As in the UK, this time may also be used to arrange re-training to improve future employment prospects.
Notifying the Minister
Where an employer proposes to make at least 21 employees redundant, the Social Security Minister must be notified. This is to ensure that relevant government agencies, such as those providing employment services, are alerted and prepared to take any appropriate measures to assist or retrain the redundant employees. With that in mind the Social Security Minister will have the discretion to notify other Ministers as appropriate in the circumstances (e.g. Economic Development), subject to data protection constraints.
Removal of upper age limit
Redundancy payments, as drafted, are calculated including all years of service, including years beyond age 65. The Employment Law currently provides that an employee over age 65 (or the normal retirement age for the job) is not protected against unfair dismissal.
In its February 2007 recommendation, the Forum recommended that all years of service up to age 65 (or normal retirement age) should count in calculating a redundancy payment to match the Employment Law age related provisions relating to unfair dismissal, whilst also recognising that future age discrimination legislation might require the removal of the upper age limit in the calculation of awards.
Rather than making new legislation that would undoubtedly contravene future discrimination laws, the redundancy legislation was drafted without the upper age limit and it was intended to give further consideration to any consequences of the upper age limit remaining in the unfair dismissal provisions of the Employment Law.
If unfair dismissal protection continues to be limited by age, an employer could make an employee redundant at age 65 and claim that the grounds for dismissal were for a reason other than redundancy in order to avoid the redundancy payment, leaving the employee would have no recourse to the Tribunal to claim unfair dismissal. The proposed amendment therefore removes the upper age limit from the unfair dismissal provisions, giving employees the right to protection against unfair dismissal beyond the normal retirement age.
Notice periods on Termination of Employment
The generous periods of notice provided in the Employment Law were intended to compensate employees for the lack of redundancy legislation at that time. The notice periods set out in the Termination of Employment (Minimum Periods of Notice) Law 1974 were doubled in 1994 specifically to provide that balance and the extended periods were transferred into the Employment Law.
The Minister considers that it is logical and equitable to reduce the periods of notice on enactment of the redundancy payments legislation. Article 3 of the draft amendment reduces the minimum notice periods to those required in the UK, which is considered to be an appropriate level below the current requirements, whilst being greater than the notice periods that applied prior to the 1994 increase in respect of the lack of redundancy legislation (as set out in Table 1, below).
To reduce the periods to those set out in the 1974 Law would be a regressive step and would not compare favourably with modern standards in other jurisdictions (see Table 1).
Table 1 – Minimum statutory notice periods on termination of employment
Length of Service | Current Employment Law | 1974 Law | UK | Isle of Man | Guernsey |
1 week | 1 week | None | none | none | none |
4 weeks | 1 week | None | 1 week | 1 week | 1 week |
26 weeks | 2 weeks | 1 week | 1 week | 1 week | 1 week |
1 year | 2 weeks | 1 week | 1 week | 1 week | 1 week |
2 years | 4 weeks | 2 weeks | 2 weeks | 2 weeks | 2 weeks |
3 years | 4 weeks | 2 weeks | 3 weeks | 3 weeks | 2 weeks |
4 years | 4 weeks | 2 weeks | 4 weeks | 4 weeks | 2 weeks |
5 years | 8 weeks | 4 weeks | 5 weeks | 5 weeks | 4 weeks |
6 years | 8 weeks | 4 weeks | 6 weeks | 6 weeks | 4 weeks |
7 years | 8 weeks | 4 weeks | 7 weeks | 7 weeks | 4 weeks |
8 years | 8 weeks | 4 weeks | 8 weeks | 8 weeks | 4 weeks |
9 years | 8 weeks | 4 weeks | 9 weeks | 9 weeks | 4 weeks |
10 years | 12 weeks | 6 weeks | 10 weeks | 10 weeks | 4 weeks |
11 years | 12 weeks | 6 weeks | 11 weeks | 11 weeks | 4 weeks |
12 years | 12 weeks | 6 weeks | 12 weeks | 12 weeks | 4 weeks |
13 years | 12 weeks | 6 weeks | 12 weeks | 12 weeks | 4 weeks |
14 years | 12 weeks | 6 weeks | 12 weeks | 12 weeks | 4 weeks |
15 years + | 16 weeks | 8 weeks | 12 weeks | 12 weeks | 4 weeks |
Insolvency Fund
The Forum recommended that an insolvency fund should be set up, however it was considered that a great deal of further research would be required to create such a fund in order to ensure that employees are paid what they are owed in genuine insolvency situations, without the administration and cost of such a fund becoming disproportionate to its purpose.
The proposed amendment does not make any additional provisions for the protection of redundancy payments in insolvency situations. Work is progressing as a priority on the development of an insolvency fund and the Minister is committed to bring a proposition to the States later in 2009. The preparation of that legislation is likely to require amendments to existing legislation, including the bankruptcy law.
Financial/manpower implications
It is anticipated that the Jersey Advisory and Conciliation Service and the Jersey Employment Tribunal will be able to manage any additional case load within existing budgets. However, additional funding of approximately £20,000 per year (allowing an additional one day Tribunal hearing per month, plus administrative support and services) might be required to enable the Employment Tribunal to deal with applications from redundant employees, particularly in the current economic climate.
European Convention on Human Rights
In the view of the Social Security Minister the provisions of the Draft Employment (Amendment No. 5) (Jersey) Law 200- are compatible with the Convention Rights.
[1] www.gov.je/SocialSecurity/Employment/Employment+Relations/The+Employment+Forum.htm
[2] [2] www.gov.je/SocialSecurity/Employment/Employment+Relations/The+Employment+Forum.htm
[3] Jersey Employment Tribuanl Case number 2502037/06
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