Twitter is being threatened with multiple claims by their employees following mass redundancies. This provides a stark reminder to all employers of the risks that comes with an employer implementing large scale redundancy exercises.
Following Twitter’s takeover by Elon Musk in 2022, the company immediately took steps to drastically reduce its global headcount with suggestions that it has halved its previous staff of 7,500.
In the UK, 180 employees were dismissed in a large-scale redundancy exercise in early November 2022 with at least 43 now pursuing the company alleging their dismissal was unfair and unlawful.
Openly, Twitter has justified the requirement for the reduction in staff on the basis that the company is required to make significant cost savings in order to continue to operate.
Major numbers of claims in the UK by dismissed employees, added to reports of other mass actions taken by staff in other countries, has the potential to undermine the costs savings that were proposed and expected as a result of significant staff reductions.
In the UK Twitter is alleged to have conducting a “sham redundancy” procedure including failures to consult staff before dismissals were implemented and a concerted attempt to retrospectively justify immediate dismissals which were implemented without warning.
It remains to be seen whether or not the allegations by dismissed staff in the UK will end up in Employment Tribunal claims or out of court settlements will be agreed. Other employers considering large scale redundancy exercises should be mindful of the potential fall out of a failure to adhere to laws including a requirement for minimum periods of consultation prior to dismissal.
Whilst the need for financial savings may be a significant driver for redundancies being implemented, employers should also be mindful of the need to be able to demonstrate the particular rationale for implementing particular redundancies. It is unlikely that a need to save money, genuine as that may be, will be sufficient to justify a failure to adhere to procedures or to explain the reasons for the redundancies themselves.
What the Law Says
Redundancy is a mechanism used by employers when a company needs to reduce the number of its employees. It is one of the five potentially fair reasons for which an employer can dismiss an employee.
According to the legal definition, a redundancy situation can occur in three types of situations:
- when a company closes or intends to close all or some of its business operations;
- where a particular place of work is closed; and
- where there is a diminished requirement for employees to carry out a particular type of work.
Whilst this sounds straightforward, in practice there are distinctions to the definition that employers need to bear in mind.
Intriguingly, a business closure is not required to be a permanent closure for it to trigger a redundancy situation. It is possible for a redundancy situation to arise even where an employer only intends to close a business on a temporary basis. This, of course, begs the question as to what amounts to a temporary closure, which will be decided on a case-by-case basis depending on the particular facts. For example, case law suggests that a 4-week closure to enable refurbishment was not significant enough to constitute a temporary closure resulting in a redundancy situation.
Employees will only be potentially at risk of redundancy where it is their place of work that is closing or ceasing to support the work they undertake. Whilst in many cases it will be easy to establish an employee’s place of work, employers should be mindful that the assessment must be based on the factual circumstances prior to the dismissal, not simply the terms of the employee’s contract. For example, if an employee worked in one location throughout their employment, even though their contract may include a mobility clause to allow them to work from any location, it would be illogical to suggest the employee was employed anywhere but at the one location. If that location is then closed or the work performed there relocated, the employee would be at risk of redundancy.
A redundancy will occur if a dismissal is made, wholly or mainly, because of a reduced requirement for employees to carry out a particular kind of work. For example, when work is still needed but it requires fewer employees to carry it out because some of the process has been automated or there is less work required because of a loss of a customer order or because the work is outsourced, and therefore fewer employees are needed.
One of the most common misconceptions is that a redundancy situation only arises where the employer is in financial trouble or struggling to provide work. A successful employer with plenty of work but who decides to reorganise the business because it is overstaffed, would still be looking at a proposed redundancy situation.
It is also important to remember that a reduction in headcount is not necessary to fall within this limb of the legal definition. Reducing the amount of work to be done by the same number of employees, so in turn reducing the hours they are required to work, can give rise to a redundancy situation. As a result, a full-time employee being asked to work part time would fall within the legal definition of redundancy. The alternative, asking an employee to move from part time to full time work, however, would not, because there would be no diminished requirement for work of a particular kind.
Often employers are uncertain as to whether the changes they are planning to make to working structures simply amount to a reorganisation or will give rise to a redundancy situation. However, redundancy and reorganisation are not necessarily mutually exclusive. “Redundancy” is a technical, legal definition whereas “reorganisation” simply means a change in working structures and has no specific legal meaning. Each case involving whether a business reorganisation has resulted in a redundancy situation must be decided on its own particular facts. A particular reorganisation may involve making redundancies, if the definition of redundancy is met, or it may not, where for example work is redistributed more efficiently but without the need for a reduction in either the number of employees doing work of a particular kind, or the amount of work done by those employees.