In East London NHS Foundation Trust v O’Connor, the EAT rejected an employer’s appeal against the decision of an employment tribunal to award a statutory redundancy payment to a redundant employee who had refused alternative employment following a trial period. The case turned on the application of the notoriously complex legislation concerning statutory trial periods. Below, we consider its implications for employers.
Under section 138 of the Employment Rights Act, an employee will be entitled to an automatic four-week ‘statutory’ trial period in an alternative position if:
- they have been dismissed/given notice of dismissal by reason of redundancy;
- they accept an offer of alternative employment before their old contract ends;
- the new contract begins either immediately after the end of the previous contract or within four calendar weeks (give or take a weekend) of the end of the old contract; and
- the terms of the new contract differ from their original contract (unless that difference is merely trivial). Each term is considered individually, and it doesn't matter if the new contract is more favourable than the previous one.
One reason why an employer might want to ensure that they fall within the statutory trial period scheme is that the employee will lose their right to a statutory redundancy payment if the new role is suitable alternative employment and the employee unreasonably refuses the offer, or unreasonably decides that they do not want it during the trial period.
If the requirements for a statutory trial period are not met, there are two other types of trial period that might apply:
- A common law trial period may arise where an employer tries to deal with a redundancy situation, not by dismissing an employee and offering alternative employment in a new role, but by imposing new terms and conditions in breach of contract instead. In those circumstances, the common law recognises that the employee should have a reasonable period of time to try out the new job and decide whether to accept it, or treat him/herself as constructively dismissed and leave. As there is no established length for a common law trial period, it can be difficult to identify the point at which an employee can be considered to have accepted those terms and lost the right to resign and claim constructive dismissal.
- Where the employer does not give notice of dismissal, but offers a new role on a trial basis, the parties may agree upon a contractual trial period. Although this would not enable the employer to avoid the payment of statutory redundancy pay where the employee refuses the offer or leaves during the trial period, it should at least avoid the uncertainty of a common law trial period by setting a clear date at which the trial would come to an end.
Mr O'Connor was employed as a Psycho-Social Intervention ("PSI") Worker by the East London NHS Foundation Trust (“the Trust”). In March 2017, as part of a restructuring at the Trust, he was informed that he was at risk of redundancy, with his current role of PSI Worker due to be "deleted" with effect from 3 July 2017. He was invited to a meeting on 13 June 2017 to discuss possible suitable alternative roles. The letter inviting him to the meeting stated that it was “likely” that the outcome of the meeting would be that he would be issued with formal notice of dismissal on grounds of redundancy. However, such formal notice was not in fact issued. Mr O’Connor then began a trial of a different role of Care Coordinator on 3 July 2017.
The trial period was extended to 9 August 2017 to accommodate a pre-booked period of annual leave. At that stage, the Trust had been prepared to confirm the success of the trial period and wrote to Mr O’Connor setting out details of his contractual terms, should he accept the role on a permanent basis, describing these as an amendment to his existing terms and conditions of employment. However, Mr O’Connor then went off sick and raised a grievance contending that the Care Coordinator role was not a suitable alternative and the Trust agreed to extend the trial period further while this was dealt with. (The Trust did not realise at the time that it could not legally extend a statutory trial period.) Mr O’Connor’s grievance was rejected in November 2017, and he declined the Trust’s repeated offer of the Care Coordinator role.
Finally, in December 2017, the Trust dismissed Mr O’Connor but refused to make a statutory redundancy payment, taking the view that Mr O’Connor’s statutory trial period had ended on 9 August 2017 and that the Care Coordinator role had been suitable alternative employment which Mr O’Connor had unreasonably refused, thereby forfeiting his right to a redundancy payment.
Employment Tribunal awards statutory redundancy pay
Mr O’Connor brought a claim in the employment tribunal (ET) seeking a statutory redundancy payment. The ET decided that the trial period that had begun on 3 July 2017 had not been a statutory trial period because the Trust had failed to dismiss Mr O’Connor (or serve notice of dismissal) before it had offered him the Care Coordinator role. In the ET’s view, Mr O’Connor was only dismissed in December 2017 and he was therefore entitled to statutory redundancy pay. The Trust appealed to the EAT.
EAT dismisses employer’s appeal
The EAT upheld the ET’s decision. The EAT referred to the Trust’s written communications with Mr O’Connor, noting that although the Trust had confirmed that his PSI Worker post was to be deleted with effect from 3 July 2017, this was not equivalent to a notice of dismissal. Whether or not notification of the "deletion" of the post in which the employee is employed will amount to notice of dismissal will depend on all the facts and circumstances of the case. In this case, the ET had considered all relevant circumstances and had been entitled to conclude that Mr O’Connor had not been dismissed as of 3 July 2017, and that the trial which he began on 3 July 2017 was therefore not a statutory trial period.
The EAT therefore sent the case back to the ET for determination of the question whether Mr O’Connor’s dismissal in December 2017 was by reason of redundancy and whether a redundancy payment was due.
This decision confirms the view that a statutory trial period does not arise unless the employer has actually given notice of termination of the employee’s original contract.
The judgment in this case may seem surprising – the Trust had been very clear that Mr O’Connor’s PSI Worker role was to be deleted with effect from 3 July 2017 and it would therefore seem natural to assume that there was sufficient clarity about the ending of his old contract to trigger a statutory trial period for the new role. However, the EAT was clearly influenced by the content of the Trust’s communications with Mr O’Connor – in particular, the June letter stating that it was likely formal notice of dismissal would be issued (which did not in fact occur) and the August letter indicating that the new terms that would apply at the end of the trial period constituted an amendment to the existing contract both supported the conclusion that the Trust had not actually dismissed Mr O’Connor before it offered him the Care Coordinator role on a trial basis. The Trust’s agreement to extend the trial period to accommodate Mr O’Connor’s pre-booked leave and to handle his grievance may also have played into the EAT’s decision that this could not have been a statutory trial period on the facts.
In practice, of course, it is not uncommon for employers to offer alternative positions during the consultation process, before issuing formal notice of dismissal for redundancy. This case means that it is unlikely employers will be able to rely on a statutory trial period in such cases. Accordingly, in order to avoid the potential uncertainty of a common law trial period, we recommend that employers explicitly agree with the employee the terms of any trial period that will attach to the alternative role.
How Make UK can help
Our new national seminar, 'Redundancies: Top tips to tackle the trickiest issues (or, ideally, avoid them altogether)', is running during November at various locations across the UK. We will address some of the trickiest issues that can arise in a redundancy exercise (including alternative employment and trial periods) through a series of case studies and interactive exercises, as well as realistic options for side-stepping redundancies.
Your booking will include:
- A confidential, one-to-one consultation with a Make UK redundancy expert to discuss specific questions on difficult issues you're facing or want to avoid (to be arranged at a time that is convenient for you).
- A training pack for line managers providing basic guidance on handling redundancies with dignity, minimising legal risks and keeping the process on track.
- A practical guide on measures and options aimed at avoiding redundancies while still achieving cost savings and maintaining an effective and cohesive workforce.
For more information and to book your place, click here.
Make UK’s expert advisers can also provide specialist and confidential guidance on restructuring, redundancies and other HR and legal issues as they arise, as well as offering bespoke training on redundancies and other issues in-house. Contact us by email or on 0808 168 5874 for more information.