Closure of Business - Essay Example

?Closure of Business I. Introduction Employers are allowed to terminate the services of their employers not only by reason of financial losses even when the business is profitable provided that the statutory requirements for closure or redundancy are complied with. Thus, an employer cannot be charged with unfair dismissal if the severance of work is anchored on closure of business or redundancy. Due to unfavourable business climate, Sally Trent is contemplating on closing her photo/design shop which employs five people. Of the five employed, Gale reports on a part-time basis with a job title sales and photo shop assistant, two are Saturday staff where one had gone off to college and the remaining two are full-time employees, Greg and Tony who are the manager and assistant manager, respectively. Gale, Greg and Tony have employment contracts but it is only Greg’s contract which has a re-assignment provision. If Sally proceeds with her plan to close shop and declare all positions redundant, she would be able to absorb one to her other business but at a lower salary. But as Sally considers closing her photo/design shop, another business opportunity was offered by ProntoPics Plus Ltd. but it shall entail commercial printing which would compete with Sally’s other business. If Sally accepts the offer, the operations of the photo/design shop shall remain the same which would include the status and salaries of the employees. To help Sally decide, she wants to know her legal options and obligations pursuant to the scenario presented above. II. Discussion The promotion of the welfare of the working class is a recognized policy but an employee’s tenure is not a perpetual right intended to destroy or oppress the employer. The employer therefore has the prerogative to exercise in good faith the right to close the operation of the business, either totally or partially. The employer cannot be compelled to continue to operate its business but must nevertheless comply with legal processes before it can implement the cessation of its business or reduction of its operations. To manifest good faith, the employer must define the criteria in objective and fair manner on who will be retained and who will be let go through the redundancy plan and thereafter, notify the employees affected in writing. It is not enough though to notify the employees, the issue must be explained to them individually. It is further required for the employer to consult and listen to the suggestions of the employees to forestall termination. And, if other alternatives or options are available then the same must be explored as opposed to the implementation of redundancy or termination phase. There are two options presented by Sally thus it shall be discussed separately. The first scenario is to close the shop completely due to losses. The lack of business transaction validates the severance of employment. Since it is within the discretion of Sally to cease business operation, she cannot be compelled to continue operating at a loss due to misplace sympathy to the employees. However, she must pay redundancy payment to the dismissed employees who have rendered continuous service at least two years reckoned at the date of the dismissal. If an alternative work offer is made to the employee that is of similar conditions, pay, status and other benefits to the employee’s present position, he is free to accept or reject the offer. However, if it is shown that the offer is unreasonably rejected the employees can no longer demand redundancy pay and worse consequence of such refusal shall exempt the employer from paying the same. Applying the foregoing standard, Greg shall not be entitled to redundancy payment as he can be re-assigned to Sally’s other business offices pursuant to his contract. If the offer to be re-assigned is refused by Greg, he cannot make a claim for redundancy payment. Nevertheless, Greg can fight the re-assignment on ground that it is a diminution of his present status not to mention that his salary is substantially reduced. In all probability, the position of Greg should he refuse the re-assignment is more feasible hence if he demands payment of redundancy pay then it must settled amicably to avoid protracted and tedious litigation. Gale who works part-time, including the two Saturday personnel should not be treated differently. They are accorded the same rights as full-time workers but since there tenure is not secure, they are the first to be removed. It is however required that their removal must be based on reasonable and equitable grounds as well as required under the Transfer of Undertakings (Protection of Employment) Regulation of 2006. Employers cannot escape liability if the motivation for their termination is tainted with bad faith. However Sally, is in dire-straights and under r 7 (1)(b) of TUPE she is well within her rights to dismiss employees in order for her not to incur any more losses. This is supported by s. 98(2) (c) of the Employment Rights Act of 1996. The recent rulings of the House of Lords in the case of Safeway Stores Limited v Burrell [1997] IRLR 200 applying the provision of Section 139 of the Employment Act 1996, statutorily defined redundancy to include not only dismissals being attributable wholly or mainly to redundancy in the employers business but also the location of business and/or reduction in working of particular kind. In Murray & another v Foyles Meats Limited [1999] IRLR 562, it was decided that redundancy is a question of fact which requires an inquiry whether the employer's business requirements altered in accordance with Section 139 and if so, is this the reason for the cessation of work? If the question is answer in the affirmative then redundancy exists and therefore validated. This brings us to the second alternative presented by Sally. This, by far, is the better solution since the termination of her employees shall be obviated. Nevertheless, she can still proceed with the termination of the employees whose function may no longer be relevant since the work required under the new contract with ProntoPics is different from the old photo/design shop. So also, the termination may be justified under redundancy since the functions or job offered by ProntoPics is similar to her present business at Haddenham, she cannot be compelled to maintain two offices and personnel performing the same functions or engaged in the same business undertaking. Much more, it is not logical or prudent for her businesses to compete with each other. However, under TUPE, prior notice to both the employees with regards to the present condition of the stores in Haddenham and the opportunity presented by ProntoPics. Sally for all intents and purposes are compelled to compensate the redundant employees for their separation as a result of the situation between the two stores. It cannot be denied that the operation of a business is for the realization of profit or gain. Thus it is within the legitimate domain of the employer to maximize his profit by adopting measures which would streamline his operation as well as trim down his personnel without sacrificing quality of work. Again, Sally is not under obligation to maintain the employees whose jobs duplicate the functions of other employees. It is within Sally’s best interest and prerogative to adopt policies or institute changes in her operations to ensure that profits are increased and in such exercise, Sally can legitimately merge or consolidate her businesses or sell assets notwithstanding that in the process it may cause the termination of some of her employees. It cannot be argued that Sally has to retain her employees in the photo/design shop as the losses which she initially declared are no longer availing. An employer may cease business operation even though the undertaking is profitable provided that the termination was done in good faith and those displaced or terminated are paid their corresponding redundancy pays according the length of service rendered. Sally has the prerogative to abolish positions which she deems no longer relevant or necessary otherwise the sole discretion or prerogative of Sally as the owner is unjustly interfered into. The decision to abolish positions or close down a business cannot be assailed unless ill-motive or bad faith is proven with substantial evidence. III. Recommendation and Conclusion Sally, as the business owner has the prerogative to protect herself against losses and self destruction with the continuous operation of a failing business venture. However, she also has the moral and legal duty to see to it that the rights and well being of her employees are protected. In compliance with this obligation the Law has laid out the conditions and the process by which she can cease the operation of her business and proceed with the termination of the employees thereof. A group and individual dialogue between Sally and her employees should be scheduled at the soonest possible time to discuss among other things the intention of Sally to close the business due to business reversals and the future of the employees concerned. The dialogues and the process of termination should be documented and must be compliant to the requirement of the Labour Law with regards to redundancy specifically the TUPE or the Transfer of Understanding Protection of Employment ((United Kingdom Legislation, 2006). Every opportunity that will redound to the benefit of the employee should be explored to ensure that the rights of the employee are not respected but promoted. Even if Sally has no legal obligation to retain some if not most of her employees she is however, compelled to present the opportunities available with the possible acceptance of the offer of ProntoPics. The employees therefore would have the option to refuse the offer or accept it if they so desired. REFERENCES The Stationery Office. 2009 ACAS Code of Practice 1. Disciplinary and Grievance Procedures. [pdf] Available at: [Accessed: 02 March 2011] Acas. 2010 ACAS Promoting Employee Relations and HR Excellence. [pdf] Available at: [Accessed 02 March 2011] Acas. 2010 ACAS Redundancy Handling Booklet. [pdf] Available at: [Accessed 03 March 2011] Acas. 2009 ACAS Rights at Work. [pdf] Available at: [Accessed: 03 March 2011] BIS. Department for Business Innovation and Skills. 2010 Part-time workers. 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