In recent years, it has been a rollercoaster ride for employers and employees alike in the tech sector.
Our Technology Lawyers look into the processes and effects of redundancies in the technology sector.
Background
Compared to more traditional companies, many businesses within the technology sector were better able to manage during the COVID-19 pandemic due to the early adoption of remote working and the use of online platforms and video meetings.
Many companies even increased their headcount following growth and investment in light of the surge of people working and socialising within their homes.
For example, Meta, the owner of Facebook and Instagram, nearly doubled its number of employees to 87,000 between 2019 and 2022.
However, the end of the COVID-19 restrictions and 'return to normality' led to reduced growth rates and excessive payrolls for tech businesses, with difficulties compounded by wider economic factors, such as higher interest rates.
In early 2022, aspiring projects were halted, and hiring budgets were put on hold. In January 2023, Amazon declared one of the largest layoffs ever seen by the tech industry, cutting over 18,000 jobs, whilst Peloton announced in May 2024 that it was set to lay off 15% of its staff in order to align its spending with its revenue.
In some cases, such as UK-based online car retailer Cazoo, administrators were called in, resulting in 728 redundancies. It is reported that over 90,000 employees in tech companies have been laid off so far in 2024.
Has a fair process been followed?
Redundancy is one of five potentially fair reasons to dismiss an employee. Under the Employment Rights Act 1996, a dismissal may be by reason of redundancy if the dismissal is wholly or mainly attributable to the fact that a business is closing or has lower requirements for employees to carry out work of a particular kind or for a particular kind in the place where the employee was employed.
Aside from having a fair reason to dismiss an employee, a fair procedure must also be followed, including suitably pooling similar employees together, applying objective criteria to individuals within the pool and engaging in meaningful consultation.
A fair consultation process includes:
- Open-minded consultation is needed while the proposals are at a formative stage.
- Providing adequate information about the employee's risk of redundancy.
- Giving adequate time for employees to respond.
- Genuinely exploring comments and suggestions made by employees.
However, to be able to bring an unfair dismissal claim as a result of their redundancy, the employee would ordinarily have to have met the 'qualifying period', which is two years or more of continuous employment, and it is often the case that technology companies have a high turnover of staff, with employees often not having the requisite service to bring a claim.
Do the Collective Consultation rules apply?
Data shows that larger technology companies are making redundancies, so the collective consultation rules are more likely to apply due to the volume of employees who may be at risk of redundancy.
In addition to ensuring that the redundancy dismissal is fair on an individual basis, an employer must also comply with additional requirements to provide information about its proposals and to consult on a collective basis.
Collective consultation applies when an employer proposes redundancies at a single establishment over a 90-day period.
In cases where between 20 and 99 dismissals are proposed in the 90-day period, collective consultation must be started in good time and last at least 30 days before the first dismissal happens.
For cases of 100 or more dismissals, it must be started in good time and last at least 45 days before the first dismissal.
Where collective consultation is triggered, the obligations of the employer include:
- Informing the Secretary of State.
- Identifying appropriate representatives of affected employees.
- Consulting meaningfully with representatives.
In addition to a potential claim for unfair dismissal, failing to comply with these obligations could result in the Employment Tribunal awarding what is known as a "protective award" up to a maximum of 90 days of gross pay per employee.
A failure to inform the Secretary of State is a criminal offence that could result in a fine for an employer.
Contact Our Technology Lawyers
If you would like guidance on conducting a redundancy process or have concerns about being made redundant in the technology sector, contact our award-winning Employment lawyers or our expert Technology Solicitors.
01619414000
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Jack Latham
Senior Associate
Jack has over 7 years of experience acting as an Employment solicitor. Jack has specialist expertise in redundancy, disciplinary and grievance procedures, terminations, settlement agreements and restrictive covenants.
About Jack Latham >