1. Introduction
The threshold question in any redundancy complaint is whether a genuine redundancy situation existed within the meaning of Section 7(2) of the Redundancy Payments Act 1967. Where no such situation existed, the dismissal cannot be saved by Section 6(4)(c) of the Unfair Dismissals Acts 1977 to 2015 and is liable to be found unfair.
This article addresses the Section 7(2) categories of redundancy, the evidence required to establish a genuine redundancy situation, and the leading authorities on the question.
2. Legislation and Case Law
Section 7(2) of the Redundancy Payments Act 1967 defines redundancy. The provision identifies five circumstances in which a dismissal is by reason of redundancy: where the employer has ceased or intends to cease to carry on the business; where the employer’s requirements for employees to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish; where the employer has decided to carry on the business with fewer employees; where the employer has decided that the work shall henceforth be done in a different manner for which the employee is not sufficiently qualified or trained; or where the employer has decided that the work shall henceforth be done by a person who is also capable of doing other work for which the employee is not qualified or trained.
The High Court in JVC Europe Ltd v Ponisi [2012] E.L.R. 70 (Charlton J.) held: “In an unfair dismissal claim, where the answer is asserted to be redundancy, the employer bears the burden of establishing redundancy and of showing which kind of redundancy is apposite. Without that requirement, vagueness would replace the precision necessary to ensure the upholding of employee rights.”
Section 7(2) of the 1967 Act identifies five circumstances in which a dismissal is by reason of redundancy. The categories cover cessation of business; reduction in the requirements for employees of a particular kind; decision to carry on with fewer employees; decision to change the manner of work; and decision to change the qualifications required to do the work.
Each category has its own particular features. Cessation of business is, in general, the easiest to demonstrate, particularly where the business has been wound up or sold. Reduction in requirements for employees of a particular kind is more often the subject of dispute, as it requires evidence of the actual change in business requirements.
The High Court in JVC Europe v Ponisi emphasised the precision required of the employer’s evidence. The employer must establish redundancy and must show which kind of redundancy is apposite. Vague references to “restructuring” or “efficiency”, without anchoring in the Section 7(2) categories, are unlikely to satisfy the burden.
3. Decision
WRC and Labour Court decisions on the existence of a genuine redundancy situation are highly fact-sensitive. The Adjudication Officer will examine the evidence on the actual business circumstances and assess whether they fit within one of the Section 7(2) categories.
In Henderson v Bohemian FC (ADJ-00056820), discussed in our Unfair Dismissals batch, the Adjudication Officer found that no genuine redundancy situation existed and that the asserted redundancy was a sham. The combination of an inconsistent rationale, absence of documentary support, and procedural failures resulted in a finding that the dismissal was unfair.
In Foley v Digital River (ADJ-00043952), the Adjudication Officer found that the asserted redundancy was inconsistent with the contemporaneous strategic documents and retention bonus arrangements. The redundancy label was rejected and the dismissal was found to be unfair.
Where the evidence supports a genuine redundancy situation, the Section 6(4)(c) defence is engaged. The dismissal may still be unfair on procedural grounds, but the underlying redundancy will be accepted.
4. Takeaway
For employers, the practical importance of documenting the redundancy rationale cannot be overstated. The actual business circumstances supporting the asserted redundancy should be set out in writing, with reference to the relevant Section 7(2) category and supported by contemporaneous evidence (such as financial information, organisation charts, and Board minutes).
The redundancy decision should be capable of being explained by reference to the role and the business context. A decision-maker who cannot articulate precisely what functions the affected employee performed and why those functions are no longer required will struggle to satisfy the JVC v Ponisi burden.
For employees, the existence of a genuine redundancy situation is the threshold question to test. Practitioners should examine the evidence on the actual business circumstances, identify any inconsistencies with the asserted rationale, and consider whether the redundancy label fits the facts.
Where the redundancy is rejected as a sham, the consequences for the employer are significant. The full unfair dismissal framework is engaged, and the WRC has been willing to award substantial compensation in such cases, including at the statutory ceiling.
5. Further information
This article was prepared for informational purposes only. For further advice, please email enquiries@crushell.ie or contact the offices of Crushell & Co Solicitors.
6. About Crushell & Co
Crushell & Co is a specialist law firm focused on protecting and advancing the rights of employees in Ireland. We offer a nationwide service, advising individuals on a wide range of legal and regulatory issues arising at work, including employment law, employment immigration and workplace accidents and injuries.
We help employees understand their position and options by translating complex legal issues into clear, practical advice. Our approach is tailored to each client, ensuring that our strategy is aligned with their personal and professional circumstances.
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