Chris Cox, RCN Director of Legal Services - Legal update: cuts and unfair dismissal

One obvious way of cutting costs in difficult economic times is to reduce wages, particularly as an alternative to redundancies. Where (some) employees object, how does an employer justify a subsequent dismissal and offer of re-engagement with the revised pay arrangements?

In Garside & Laycock Ltd v Booth (2011), following a consultation with staff, 77 voted in favour of a pay cut, four against and seven abstained. Two objectors were dismissed later for other reasons, but the remaining two were dismissed for refusing to accept the cuts, and the tribunal held the dismissals unfair.

The Employment Appeals Tribunal (EAT) accepted that the employer had a statutory reason for imposing the change, namely ‘some other substantial reason’, but rejected the tribunal’s decision that only where the survival of the business was an issue could it be fair to terminate and offer re-engagement on lower wages. Further, the EAT held that merely because it might have been reasonable for the employees to reject the change, that didn’t make the employer’s decision to dismiss unreasonable.

Singling out groups

Finally, and importantly, in relation to pay cuts, the EAT suggested to tribunals that it may be highly relevant to a decision as to the fairness of a dismissal in these circumstances to consider upon whom in the workforce the cuts fall. In other words, singling out a particular group, such as those not in management, to bear the brunt of the cuts could render any later dismissals unfair.