Khan v HGS Global Ltd & Anor – redundancy package offer: mutual termination or dismissal?

The case of Khan v HGS Global Ltd & Anor UKEAT/0176/15/DM addressed the issue of whether an employee’s employment had been terminated by virtue of his acceptance of the offer of a redundancy package or, alternatively, whether his employment had ended by mutual agreement. The Employment Tribunal held that Mr Khan’s employment had been ended by mutual agreement as he had been offered a redundancy package and had accepted the terms of that package. Mr Khan appealed against this decision and the Employment Appeal Tribunal rejected his appeal, holding that there had not been a termination of employment: Mr Khan had been offered a number of options (including, but not limited to, leaving by virtue of a redundancy package or continuing in his employment) and, having considered those options, opted to accept the redundancy package.

The factual background of Khan v HGS Global Ltd & Anor

Mr Khan worked for HGS Global Limited at its call centre in Chiswick, from where it operated a number of campaigns for customers, including for Dreams Limited (the Second Respondent in this matter). In March 2013 Dreams Limited decided to bring ‘in-house’ the work that was contracted to HGS Global Limited, and that this work would be carried out at its premises in High Wycombe. That decision (and the subsequent ‘follow-through’) amounted to a transfer for the purposes of the TUPE Regulations.

During the consultation exercise relating to the TUPE transfer representatives for the affected employees raised as an issue concerns that employees would have to travel to High Wycombe. Dreams Limited’s position was that, for employees who faced a commute of more than 75 minutes by virtue of the transfer could choose between three options: 1) relocating to Dreams Limited’s premises in High Wycombe; 2) applying for available roles at HGS Global Limited; or 3) potentially being made redundant.

Mr Khan had a journey time of more than 75 minutes. He was offered the three options during the consultation exercise and opted to take a redundancy package which included payment of statutory redundancy pay, pay in lieu of notice, and holiday. As a result his employment terminated on 8 June 2013.

Subsequent to being dismissed Mr Khan brought a claim for unfair dismissal against HGS Global Limited and Dreams Limited..

The Employment Tribunal’s decision

The Employment Tribunal dismissed Mr Khan’s claim for unfair dismissal, finding that there had not been a termination of his employment but that his employment had ended by mutual termination: Mr Khan had been offered a number of choices and had opted to take a redundancy packages. The Tribunal concluded that Mr Khan had not been ‘pushed out’ or pressured to take redundancy; on the contrary, the options had been put in neutral terms, Mr Khan had understood his options, and made an informed decision to accept the redundancy package.

The decision of the Employment Appeal Tribunal

The Employment Appeal Tribunal (“EAT”) dismissed Mr Khan’s appeal against the findings of the Employment Tribunal, holding that the dismissal had been by reason of mutual termination rather than termination by the employer.

The EAT considered the relevant points of law relating to dismissal, focusing primarily on the case of Martin v Glynwed Distribution Limited [1983] ICR 511 – the important question will always be “who really terminated the contract of employment?”.

The EAT went on to consider that there are a number of means by which an employment contract may be terminated, including dismissal by the employer, resignation by the employee, and mutual termination. With regards to mutual termination, if a dismissal is to be ‘mutual’ then there must be freedom of choice on the employee’s part to take this option; if there is not real choice then the dismissal will be by reason of termination by the employer. An important consideration in a redundancy context is whether, once the facts that may be give rise to a redundancy situation have been announced (e.g. relocation), the employees have simply ‘volunteered’ for redundancy or negotiated their terms of departure; the former situation will normally point to a dismissal, whereas the latter will normally point to a mutual (or consensual) termination.

The EAT found that the Tribunal had not erred in its decision that the facts of this matter pointed to a mutual termination rather than termination by the employer: Mr Khan had been offered a number of options, had not been pressured into a decision, and had opted after a period of time to accept the redundancy package offered – his termination was therefore by virtue of agreement with his employer rather than being dismissed.

Why is this case important?

The main reason why this case is important is that its facts demonstrate that if an employer acts reasonably and impartially during a redundancy process, and subsequently offers a redundancy package, then the acceptance of the redundancy package may preclude the employee from bringing an Employment Tribunal claim for unfair dismissal against the employer (as there will have been no dismissal).

It is, however, important to note that the entirety of this case could have been avoided by the offer (and acceptance) of a settlement agreement. It is not clear from the facts of this case whether Mr Khan was offered a settlement agreement when taking the redundancy option: if Mr Khan had left his employment under the terms of a settlement agreement then it is likely that he would have been precluded from bringing a claim against his employer in any event for whatever reason. Settlement agreements can therefore be a useful means of settling potential employment disputes and avoiding the cost, time, and stress of an Employment Tribunal process. Employers should therefore always consider whether settlement agreements are appropriate when carrying out a redundancy exercise.