Unjustly made redundant? Don't take it lying down

Fortunately, employees in the UK have some recourse against unjust redundancy. Employment law allows staff to bring cases against employers if their dismissal is unfair or wrongful, or if they can claim they were dismissed constructively.

More than 40,000 individuals applied for hearings in the employment tribunal system in 2002, while others took cases to the courts.

Any employee who has been with an employer for more than a year has a statutory right not to be unfairly dismissed. The Employment Rights Act of 1996 says individuals with over a year's service may only be dismissed for one of four reasons: redundancy, misconduct, poor performance, breaking the law, or some other substantial reason (SOSR).

SOSR, although seeming to offer a cornucopia of excuses, is rarely used, says Stephen Brown, a solicitor at law firm K-Legal: 'It is relevant in situations like the imprisonment of employees, and is very hard for employers to claim in a tribunal.'

It is not only a matter of having a fair reason for a dismissal; employers must also carry out the dismissal in a fair manner.

Investment banks and other businesses operating in the UK are under an obligation to provide employees with fair warning of their imminent redundancy, to help them look for alternative employment within the organisation, to select individuals for redundancy fairly, and to look at ways redundancies might be mitigated.

Brown says the final point means that if an employee offers to take a salary cut or to work a three-day week, employers are under an obligation to listen. If they refuse to implement suggested methods of mitigation, they must provide a good reason why.

Several forms of dismissal are instantly unfair. These include: dismissal related to maternity leave; dismissal for being in, or wanting to join, a trade union; dismissal for asserting statutory rights such as paid holidays; and dismissal for whistleblowing.

Wrongful dismissal on the other hand is a contractual issue. It means an employee has been dismissed without fair notice as specified in her contract, or that the dismissal contravenes the contract in some other way.

Brown says cases of wrongful dismissal in financial services frequently centre on individuals who have been dismissed in breach of their contract before bonuses are paid or before options vest.

Constructive dismissal occurs when an individual is treated unfairly or wrongly and as a result decides to leave of his own accord.

Constructive dismissal is always combined with claims of unfair or wrongful dismissal. Brown says payment of a bonus substantially below that of a similarly performing colleague may be sufficient reason for an employee to resign and claim both constructive and unfair dismissal.

Similarly, he relates an example of a banker who successful claimed constructive and unfair dismissal when he left after being asked to relocate his family abroad at a week's notice.

Some forms of legal recourse are more lucrative than others. In most cases, compensation for unfair dismissal is capped at 52,000.

Unfair dismissal cases are heard at employment tribunals. The cap is lifted in exceptional cases including sex and race discrimination and whistleblowing.

However, compensation for wrongful dismissal is not capped if the claim is heard by the High Court, as opposed to a tribunal. Wrongful dimissal claimants are entitled to compensation equivalent to rewards they would have received had the contract not been breached.

Payouts can be substantial, particularly when unpaid compensation relates to bonuses or share options.

Investment banks usually ask redundant employees to sign a waiver foregoing potential legal claims, in return for a handsome payoff.

But as redundancy payouts diminish, solicitors say disgruntled bankers are increasingly wary of signing.

Anne Nicholson, a solicitor at Fox Williams, says calls from financial services professionals are a daily occurrence: 'As banks have become less generous, more and more people are questioning the deal put on the table.'

But a legal challenge can be both a lengthy and costly process. Brown says it usually takes six months before cases are heard at employment tribunals.

Taking a case to the High Court can take years and is usually much more expensive.

The tribunal system, dealing mainly with unfair dismissal cases, is designed so that employees can represent themselves - although few do.

If the employee loses the case, he or she does not have to pay the employer's costs. However, wrongful dismissal compensation awarded by tribunals is capped at 25,000.

The higher potential winnings from the High Court in a wrongful dismissal claim look more attractive - but you might have to pay the employer's costs if you lose. These could easily be 100,000 or more.

Bringing a claim of unfair or wrongful dismissal requires careful consideration and rigorous preparation. Brown says: 'Gather evidence, take notes at meetings. Look at what happened to other people in similar circumstances.'

Nicholson advises claimants to ask colleagues to act as witnesses to events at work: 'In any meeting that might involve dismissal, you are entitled to have someone in with you.'

The 1998 Data Protection Act made gathering evidence for employment tribunal cases easier. Thanks to the Act, employees now have a legal right to see material kept on their files.

Information pertaining to redundancies is not specifically covered by the Act, but a so-called 'subject access request' can unearth comments showing that allegations of misconduct or poor performance were false.

Bankers thinking of taking former employers to court are advised to think carefully before acting.

One former employee currently involved in litigation says: 'Anyone who wants to take a bank on must be aware of the resources ranged against him or her. They can frustrate you, they can stonewall you, they can make you spend a fortune, and there is no guarantee of success.'

The figures speak for themselves. Of the 44,000 applications for employment tribunal hearings in 2002, a mere 3,300 resulted in a winning verdict for the claimant.

Fewer than 15,000 made it to the tribunal at all.

But many of the remaining applications were doubtless settled out of court: if nothing else, legal action can scare employers into paying out something.