Redundancy or a pretext?

Redundancy or a pretext?

 Redundancy is generally recognised as a legitimate ground for terminating employment relations. Businesses may need to restructure, reduce costs, reorganise their operations, or eliminate certain positions. However, the legal characterisation of a dismissal does not depend solely on the label used by the employer. A dismissal described as a “redundancy” may raise concerns where the position allegedly abolished continues to exist in substance, the same functions are subsequently performed by another employee, or the redundancy procedure is used merely as a formal justification for terminating a particular employment relationship.

 The starting point is that employers generally have managerial discretion to reorganise their businesses. A court will not normally substitute its own business judgment for that of an employer. Decisions concerning the organisation of a business, its workforce, economic strategy and internal structure may legitimately fall within the employer’s managerial sphere. Nevertheless, managerial discretion is not unlimited. Where a redundancy affects employees’ rights, courts may examine whether the stated organisational or economic reason corresponds to the actual circumstances surrounding the dismissal and whether the applicable procedural safeguards have been respected. The relevant assessment is therefore not whether the employer made the most commercially appropriate decision, but whether the redundancy was genuinely connected to the organisation of the business and whether the dismissal complied with the applicable legal framework.

 The case law of the Court of Justice of the European Union is particularly relevant in the context of collective redundancies. In Junk v Kühnel case, the Court examined the timing of the employer’s obligations under Directive 98/59/EC on collective redundancies. The Court emphasised that the consultation procedure must take place before the employer has effectively completed the decision-making process leading to dismissals. The significance of this ruling lies in the purpose of consultation. It is not intended to be a procedural formality carried out after the employer has already determined the outcome. Rather, employee representatives must have a genuine opportunity to discuss alternatives, including measures capable of avoiding or reducing redundancies and mitigating their consequences. Consultation must therefore take place at a stage when it can still have a meaningful influence on the employer’s decision. The CJEU further developed this approach in J.L.O.G. and J.J.O.P. v Resorts Mallorca Hotels International SL case. The case concerned the point at which an employer becomes subject to the obligation to initiate consultations in the context of collective redundancies. The Court focused on the employer’s actual decision-making process rather than requiring every detail of the planned dismissals to have been finalised. This approach reinforces the preventive character of employment protection. Legal safeguards should become effective while alternatives remain possible, rather than only after the dismissal has become inevitable. Consequently, the sequence of events leading to the redundancy may itself be relevant to judicial assessment. The timing of restructuring plans, internal decisions and consultation can help determine whether the statutory process was genuinely capable of achieving its purpose.

 A separate issue arises where the position itself is allegedly abolished, but the work associated with it continues. This may occur where an employer removes a particular position and subsequently introduces another position with a different title but substantially similar duties. A difference in terminology does not necessarily demonstrate a genuine organisational change. In such circumstances, courts may examine the actual content of the positions rather than their formal titles. Relevant considerations may include the functions attached to the former and new positions, the timing of the restructuring, the extent to which the previous work continues, and whether the employer can provide a legitimate organisational or economic explanation for the change. The analysis should remain fact-specific, since the creation of a new position following a redundancy is not, by itself, sufficient to establish that the original dismissal was artificial. The broader principle emerging from this approach is that substance may prevail over form. An employer may formally restructure its workforce, alter job titles or follow procedural requirements, while the practical reality of the employment relationship remains substantially unchanged. Judicial scrutiny may therefore extend beyond the wording of the dismissal decision to the circumstances in which it was adopted and implemented.

 Although the precise legal test differs between jurisdictions, several circumstances may attract particular judicial scrutiny. These include the immediate creation of a substantially identical position, the recruitment of another employee to perform essentially the same functions, and the continuation of the allegedly redundant work within the organisation. The evidentiary context may also be significant. Where an employer relies on economic or organisational reasons, the existence and consistency of those reasons may be examined against the wider restructuring process. Similarly, inconsistencies between the stated reason for the dismissal and its practical outcome may require further explanation. The timing of consultation can also form part of this assessment. Where employee representatives are consulted only after the employer has reached an irreversible decision, the process may fail to fulfil its protective function. This does not automatically invalidate the redundancy, but it may be relevant when determining whether the employer genuinely complied with its obligations. These factors should not be treated as automatic indicators of unlawful or artificial redundancy. Their significance depends on the circumstances of each case and on the applicable national or European legal framework. The role of the court is not to prevent legitimate restructuring, but to determine whether the employer’s stated justification is supported by the factual and procedural circumstances.

 In conclusion, case law demonstrates that redundancy must be genuine rather than merely formal. Employers retain the ability to reorganise their businesses, but the exercise of that discretion remains subject to legal safeguards. Courts therefore examine the substance of the employer’s decision, distinguishing genuine organisational change from dismissal disguised as redundancy.

Bibliography: 

Court of Justice of the European Union, Junk v Kühnel, Case C-188/03, Judgment of 27 January 2005. 

Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies.

Court of Justice of the European Union, J.L.O.G. and J.J.O.P. v Resorts Mallorca Hotels International SL, Case C-589/22, Judgment of 22 February 2024.

International Labor Organization, Termination of Employment Convention, 1982