Refuse Pay Cut Dismissals

05 Aug 2011

In Southampton, the bin men are revolting.


Unhappy with a proposed 5.5% pay cut, driven by the Government’s austerity measures, many have been striking on and off since 23 May.


The Council has taken the decision to give notice to those that have not signed up to new contracts.  Can dismissing an employee who refuses to accept a pay cut amount to a fair dismissal?  If it can, does this give an employer free rein to cut their wage bills?  


In Southampton, the reason for dismissal put forward by the Council will be some other substantial reason (“SOSR”). 


In order to avoid a finding of unfair dismissal, the Council will have the burden of establishing that it has a sound business reason for the dismissal.  The reason, in this case, is that the Council has got to reduce expenditure in line with Government policy.  The Council has said that it is trying to save in the region of 400 jobs and the sum of £76m over four years.


If it can establish a substantial reason, the employer must then go on to demonstrate that it has satisfied the test of reasonableness under section 98(4) of the Employment Rights Act.


This will involve consideration of the employer’s size and administrative resources and relevant factors may include:

–       whether managers are also taking a pay cut;

–       whether the new terms have been agreed with a recognised trade union;

–       consultation with individual employees; and

–       the notice of change that is given.


In the recent decision of Garside and Laycock Ltd v Booth (see page 3), the Employment Appeal Tribunal confirmed that in a SOSR dismissal for not accepting a wage-cut, the question of fairness relates to whether it was reasonable for the employer to dismiss, and not whether it was reasonable for the employee to accept a reduction in pay.  Put simply, the Employment Tribunal in that case had wrongly focused on the employee when it should have focused on the employer. 


Finally, a Tribunal should not substitute its own view of whether the employer acted reasonably.  It must examine whether the decision to dismiss for SOSR fell within the range of reasonable responses.


At the end of the day, realistically, given the state of the job market, the bin men may have little option but to accept the reduced terms and conditions, enabling the Council to start picking up the pieces.