The global economic crisis has prompted employers to look at ways of reducing overhead as they seek to stay in business.

Redundancy is a step of last resort by any employer – the implementation and selection for redundancy is often one of the most agonising decisions an employer has to make.

This article considers the process required of an employer to determine if a condition of redundancy exists and if so, the selection and implementation of the redundancy plan. It also outlines the remedies of an employee if the condition does not exist or if selection has been erroneous.

Section 30 (3) of The Employment Act 2000 ("the Act") sets out the conditions that would lead to redundancy, including reorganisation of the business, a business downturn, disposal or discontinuance of the business etc. The condition has to be genuine – it cannot be used as an excuse to get rid of a difficult employee.

Employers must also consider if there is anywhere else in the organisation where the employees can be employed. This may give rise to other obligations by the employer. Or can the employee be redeployed in another part of the business in a comparable position, and without loss of seniority?

The Act is silent on the selection process, so common law, common sense and industry practice prevail.

If the employer is a party to a collective bargaining agreement ("CBA") then the selection process is set out. The Act requires an employer to consult with the employee's trade union or other representative (if any).

If there is no CBA the employer can select on the basis of 'last in, first out' – making the last recruited employee redundant; or on the basis of seniority; or it can seek volunteers; or it can consider the employee's performance and conduct record or simply ask the question – 'has the job that this employee undertakes disappeared?'

The fourth option often causes difficulties. An employer may discover that it has not kept proper records of the employee's performance, that no appraisals have been undertaken, and that any concerns about an employee's progress have not been recorded.

Employees may find selection is being based upon very recent or even old events: or the appraisal (if any) is inaccurate – and at the time the employee did not challenge it or otherwise make representations.

The employer's selection can, of course, be challenged. Sometimes, a meeting between the employer and employee can lead to resolution. The employer's policies & procedures manual or handbook should provide for the procedure to grieve a decision. If that does not resolve matters then the obvious next step will be the redundancy and a complaint to the Employment Inspector under the Act.

However, if the employer is ceasing business or the job has genuinely disappeared the only issue would appear to be the calculation of severance allowance and any other payments to which the employee is entitled.

An employee is entitled to notice in the same way that he would if his employment had been terminated. The notice period will be in accordance with the contract of employment or statement of employment. If this is not stated then the notice will be the statutory notice under section 20 (1) of the Act.

The employer may prefer the employee not to work his notice in which case it will make a payment in lieu of notice equivalent to the salary and benefits that the employee would have received if the employment had continued for the length of the notice period.

In addition to the pay and benefits that he should receive during the notice period, an employee should also receive payment for any accrued but so far unpaid salary, payment for any vacation accrued but not taken, and severance allowance.

An employee may be entitled to other payments and the employment contract should be closely scrutinised.

Severance payment is calculated in accordance with section 23 (2) – the employee must have been continuously employed with the employer for one year before an employee can claim entitlement. Assuming that the employee has this tenure then he will be entitled to the equivalent of two weeks wages for each complete year of service up to 10 years service and three weeks for each year thereafter with the maximum capped at 26 weeks wages under the Act.

An employee's contract or the CBA may have a different formula and entitlement. The severance allowance provided for in the Act is the minimum that an employee should expect to receive for a termination by reason of redundancy.

Attorney E. Kelvin Hastings-Smith, FCIArb, is Counsel and Manager of the Litigation Practice Group at Appleby. A copy of Mr. Hastings-Smith's column can be obtained on the Appleby website at www.applebyglobal.com. This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.