Each month, solicitors Wright Hassall take a look at a different dilemma for small businesses from a legal perspective. This month they tackle rehiring after redundancies.
Q: “I have just made a round of redundancies as there wasn’t enough work, but now an unexpected contract has come in and we need extra staff to fulfil it. Legally, where do I stand on rehiring former staff and new employees?”
A: You can rehire former staff and hire new employees if business has picked up but you need to be careful that your original redundancy process was appropriate and fair. Many businesses are facing a similar scenario as the economy shows signs of strengthening and it makes sense to rehire former employees – they understand the business and its culture and you know what skills they possess.
Was the redundancy genuine?
Under current legislation, if a business finds itself having to hire staff after making redundancies it is not obliged to rehire its previous employees. A potential danger in taking on staff after a redundancy is that you may face a claim for unfair dismissal. If you have followed procedures correctly, this shouldn’t be an issue. A tribunal will accept that you are best placed to make commercial decisions about your business. Where the redundancy is quickly followed by a period of rehire however, you should be prepared to evidence the need for redundancy with reference to your order book and/or cashflow figures. Equally, you’ll want to show that you could not anticipate the new contract that necessitated the rehiring process. Where the redundancy is disputed, tribunals will look for evidence of a redundancy situation being used to mask the real reason for dismissal (discrimination, capability etc.).
Rehiring former employees
Once you’ve decided that you need to hire and/or rehire, there is the question of timing. If the upturn in work occurs before the notice of redundancy expires, then you can “rehire” your employee with no dismissal and no break in their continuity of service.
Where the employment has already terminated and you are considering rehire, a period of at least one week between the expiry of the redundancy notice and the start of new employment will sever continuity and a new contract of employment will be required (unless the parties agree to preserve continuity). If there is no break in service, then there is no requirement to make a redundancy payment.
Providing that you have followed guidance on making redundancies and your process has been fair, there is nothing to stop you from hiring new staff if you prefer. The main concern in this situation is to avoid giving redundant employees grounds on which to bring unfair dismissal claims.
As long as the process you have followed is fair and transparent, there is no reason why an unfair dismissal claim should succeed against you. Sensitive and correct handling of redundancy is always recommended and, by doing so, you increase your chances of retaining employee loyalty if you find that you need to rehire them.
Got a question you want answered by the legal team? Email editor@talkbusinessmagazine with the subject line “Legally Speaking”.