Mass redundancies continue to affect the games industry — employer and employee legal rights explained

The games industry experienced a turbulent 2023, with 11,000 jobs estimated to have been lost due to redundancies and studio closures. Around 900 of these were in the UK, with several high-profile studios affected.

Unfortunately, 2024 has not fared much better so far. Market volatility and disruption have continued as the aftershocks of the previous year’s activities are still felt. There have been high profile cuts already, such as the loss of 1,900 staff at Activision Blizzard and Xbox following Microsoft’s multi-billion-pound acquisition of Activision Blizzard as well as 11% of the workforce at Tencent’s Riot Games.

Many specific factors are at play that disproportionately impact job losses in the games industry. Here, Will Ford, Adam Goadsby and Andreas Petrou explore how redundancy works and what rights are available to both employers and employees as reorganisation continues at pace.

Volatility in game development

The video games industry has historically been an industry that is cyclical in nature, with the financial health of studios often dependent on the success of their releases and many developers working project-to-project. 

As technology has developed and the complexity of games has increased over the years, so have the size and scope of development teams, magnifying the impact of completion (or cancellation) of projects. The industry has also pulled back from its expansion during the COVID-19 pandemic and is approaching things differently in a post-pandemic world. 

When such factors are coupled with the wider economic challenges that have arisen over the last year or two — such as high inflation, rising supply costs and high interest rates (that impact on the cost of funding) as well as technology like AI and large language models increasingly supporting and automating work — it’s no surprise that people across the games sector are often subject to job losses and reorganisations. 

This is just as true for indie studios as it is for AAA developers. 

Growing unionisation

Unionisation is perhaps unsurprising when considering the stories that have dominated headlines in recent times, including mass redundancies, sexual harassment scandals and ‘crunch’ overtime practices.

Various teams at big-name US studios (such as Sega of America and ZeniMax) have already unionised, while in Europe workers at CD Projekt Red (developer of Cyberpunk 2077 and The Witcher) have followed suit after another wave of job cuts. 

In the UK, Games Workers Unite (GWU) operates as a branch of the legally recognised Independent Workers’ Union of Great Britain (IWGB). It provides employees with legal and financial advice while campaigning for better working conditions and can accompany employees to disciplinary and grievance hearings. If recognised by the employer, the GWU could negotiate terms and conditions on behalf of its members or require the employer to consult with a union representative in the event of collective redundancy.

Redundancy in UK law

All employers must comply with regulations set out by the Employment Rights Act 1996 and the Trade Union and Labour Relations (Consolidation) Act 1992. Meanwhile, employees are granted certain rights and protections by the legislation. 

Redundancy can be a fair reason for dismissal in the following circumstances: 

• Business closure — where an employer is ceasing (or intending to cease) the business for the purpose of which the employee was employed. 
• Workplace closure — where an employer is ceasing (or intending to cease) the business in the place where the employee was employed.
• Reduced requirements — where there is a reduced requirement for employees to carry out a particular kind of work (or work in the place where the employee was employed). 

The reduced requirements scenario is where we see the majority of legal issues arise. As a consequence, it’s also where the Employment Tribunal (which makes decisions in legal disputes around employment law) most frequently gets involved. This is because an employer must conduct a fair process as to which employees to keep and which to let go — any failings here could create the risk of a claim for unfair dismissal, which carries both reputational damage and financial risk. 

Am I entitled to redundancy protection?

Redundancy is only available to eligible employees — those who have been working for their current employer for at least two years. The definition of ‘employee’ in a legal sense is critical — workers and self-employed contractors lack the necessary employment status to be eligible for redundancy pay or unfair dismissal. 

While this may affect many contractors and temporary workers across the games industry, it’s understandable in an industry that requires organisational flexibility, where gaps in resource need to be filled in advance of deadlines before returning to the status quo once a deadline has passed. While employers aren’t completely unrestricted here, studios can let these non-employees go without the need to consider redundancy eligibility or procedures.

For top contractors, these arrangements can be lucrative and offer a level of flexibility that’s unavailable to your typical employee. However, for many these arrangements come with vulnerability.

Studios should be careful not to adopt this contractor approach in name but not substance, as a ‘deemed employment relationship’ takes effect regardless of how the relationship is labelled. Whether a particular working arrangement is one of employment is assessed holistically, with regard to a multitude of factors. A company that makes use of contractors may therefore inadvertently be liable to redundancy and/or unfair dismissal in respect of ‘contractors’ (or indeed workers) if a tribunal infers that they are, in fact, employees. 

Rights as an employee 

If an employee is told that they’re being made redundant, the resulting dismissal isn’t automatically lawful or fair. They may be able to bring a claim for unfair dismissal if they’ve been unfairly selected for redundancy, the selection was discriminatory or the employer failed to follow a fair procedure. 

Obligations on the employer

A claim for unfair dismissal can result in significant time, expense and reputational damage for the employer. To comply with its legal obligations, an employer must properly consider suitable alternatives to redundancy from the outset. 

This may include:

• alternative vacancies
• reducing the use of agency workers and/or not renewing the contracts of contractors
• inviting employees to volunteer for redundancy
• temporarily laying off employees or reducing their hours*.

To reduce the likelihood of unfair dismissal claims, it’s essential for employers to follow a fair redundancy procedure, which includes carrying out an appropriate consultation and identifying an appropriate pool of employees who could be selected. This must be done fairly by applying objective criteria. 

*This may give rise to an entitlement to a redundancy payment in any event or a claim for unfair dismissal. 

Collective consultation

Additional hurdles apply when an employer plans on making 20 or more employees redundant over a period of 90 days or less. 

If you’re proposing to make collective redundancies, you must notify the Government via a prescribed form. The failure to do so constitutes a criminal offence. 

Employers must also inform and consult appropriate representatives of the affected employees. This might be elected employees or trade union representatives (if the union is recognised by the employer).

Claims that allege unfair dismissal and/or failure to properly inform or consult are brought in the Employment Tribunal. This may award up to 90 days’ actual gross pay for each affected employee where there has been a failure to collectively consult — likely a substantial sum where multiple redundancies are involved.

Talk to us

Redundancy can be a risky and expensive process for employers and a concerning one for employees who will want to ensure that any process is conducted fairly. 

Our games and interactive entertainment team includes employment law experts who can help both employers and employees to navigate through the tricky waters in the event of unfair dismissals and negotiated settlement agreements.

To find out more, talk to us by completing our contact form below.