Your AI Ambitions Might Spark a Restructure: Are You Legally Ready?

AI-Driven Redundancies: A New Reality

At the start of 2025, it was reported that global powerhouse, Microsoft cut approximately 6,000 roles as part of a restructuring process aligned with their AI driven strategy. Many functions were reshaped, leadership roles have dwindled, and many roles have been redefined or replaced by AI-drieven operations. However, Microsoft is not alone. Technology companies are heavily investing in the AI future which creates a domino effect resulting in wide-spread organisational change.

AI isn’t just changing what tech companies do, it’s reshaping who does the work.

This shift raises some important questions for employers to consider:

• When does replacing an employee with AI become a redundancy situation?

• How can a restructure be conducted fairly in the face of rapid technological change?

• What obligation do they owe their workforce during this technology transition?

Understanding Redundancy in the Age of AI

The Employment Rights Act 1996, section 139 sets out the requirements for a redundancy situation. It stipulates that in order for there to be a genuine redundancy situation the employer’s need for employees to carry out work of a particular kind needs to have ceased or diminished. In practical terms, if AI replaces or significantly reduces the need for employees in a specific role, a redundancy process may inevitably follow, even if the work continues to be done. But crucially, declaring a redundancy doesn’t remove the employer’s responsibility to treat affected employees fairly.

AI may be new territory, but the rules of redundancy are well-established and still apply. In fact, the use of emerging technology to justify workforce reduction places a greater importance on procedural compliance and transparency.

For companies proposing 20 or more redundancies in a 90-day window, collective consultation duties under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) are triggered. This includes:

• Informing and consulting with employees, employee representatives and/or trade unions;

• Notifying the Secretary of State using a HR1 Form (the timescales for this differ between a 30- or 45-day minimum notice period depending on the scale of redundancies);

• Conducting meaningful individual consultations with all at risk employees;

• Applying fair, objective selection criteria to each at risk employee;

• Exploring suitable alternative employment wherever possible.

Failure to meet the requirements set out in TULRCA can lead to significant consequences for the employer, including tribunal claims for unfair dismissal and potentially discrimination, protective awards of up to 90 days’ pay, and criminal liability for failure to notify the Secretary of State.

Legal Doesn’t Always Mean Ethical

The ethical implications of AI are profound.

Replacing humans with AI doesn’t just affect spreadsheets; it disrupts careers, identities, and livelihoods. This should prompt employers to consider:

-          Whether the use of AI is a short-term cost cutting measure?

-          Have employees been given a fair opportunity to retrain, upskill or move into a suitable alternative role

-          Are some groups of employees, potentially older, neurodivergent or those without digital access more likely to be dismissed than others, leaving the door open for claims of discrimination?

Alongside the above points, AI seemingly has broader social implications too. It accelerates the risk of extending the gap between those with highly sort after digital skills and those who don’t. Businesses may find themselves fuelling inequality by exiting employees who cannot keep up with AI, without trying to upskill them.

In this new AI-driven reality, compliance is no longer enough. A responsible employer must keep striving for a higher bar, one grounded in transparency, empathy, and long-term thinking. This means that employers need to be honest with their employees about the reasons for change. It means treating consultation as a meaningful conversation, and not just a box-ticking exercise. It means investing in upskilling, generating hybrid roles, and embedding ethical oversight into every decision which could result in a redundancy.

Ultimately, how companies handle restructuring in the age of AI sends a powerful signal about their values, leadership, and the vision for the future. Because while machines may power the next wave of innovation, it’s still people who make or break a business.