Merging teams and redundancy

The Employment Rights Act 1996 sets out that one of the situations where a redundancy situation will exist is where the requirements of the employer for employees to carry out work of a particular kind have ceased or diminished. This can be shown by a reduction in the number of employees or in the total working hours.

Employers will often seek to make costs savings by merging teams and departments. Does this give rise to a redundancy situation?

In Campbell v Tesco Personal Finance, the Employment Appeal Tribunal disagreed with the tribunal’s initial assessment that a merger of three departments into two created a genuine redundancy situation for the managers in the merged team.

Mrs Campbell was employed as a risk manager on part time hours within one of three teams. The employer decided to consolidate the three teams together into two. Mrs Campbell was told that she and another manager were at risk of redundancy as the roles were being merged. Under the new structure there would be one new position of Lead Risk Manager and a post of Risk Manager. Mrs Campbell came second on a scoring matrix for the post of Lead Risk Manager and was subsequently dismissed on grounds of redundancy. 

The EAT did not consider that the reduction in the number of teams was sufficient to establish that there was a redundancy situation. It held that “the fact that three risk teams became two does not, of itself, assist in answering the question whether the requirements of the [employer] for employees to carry out risk management work had ceased or diminished”.

Indeed, there had been no finding that the employer’s requirements for employees to carry out risk management work had reduced. The addition of a leadership element to one of two risk manager positions in the new structure was not evidence of a reduced need for employees.  The same number of employees were required before and after the restructure. The work had not reduced, and the same number of employees were required to do it. Accordingly, the dismissal did not fall within the definition of ‘redundancy’.

The decision highlights the importance of considering whether a restructure will actually reduce the number or requirement for employees to carry out work of a particular kind. The fact that departments merge will not necessarily answer that question if the same number of employees are required both before and after to carry out the same number of hours work.