Redundancy – some recent lessons

Perhaps unsurprisingly given the current economic gloom, there have been quite a number of recent court decisions in relation to the fairness or otherwise of redundancy dismissals. Graham Richardson reviews some recent decisions and draws lessons for employers.

Overview

A common mistake of employers is to assume that because there is a clear redundancy situation, any dismissal of an employee by reason of redundancy will be fair. In fact in defending any unfair dismissal claim, it is necessary to show not only a potentially fair reason for the dismissal, but that a fair procedure was followed in relation to that dismissal. While a genuine redundancy situation is a potentially fair reason for dismissal, it is still necessary to show that a fair procedure was followed.

There is no “one size fits all” fair procedure for a redundancy situation. What is a fair or unfair procedure will depend on the individual circumstances of the case, and determining how best to handle a redundancy process as that process develops will often involve finely balanced decisions for employers. A number of recent court decisions help shed some light on the view the courts are currently taking on what behaviour they consider to be fair or unfair.

Requests for information during the consultation process

One difficulty which employers sometimes face in a redundancy consultation process is where an employee at risk of redundancy requests large amounts of information. To what extent do these requests need to be complied with? In Camelot Group Plc v Hogg the employee (H) asked, without giving an explanation, to see her interview notes after she had unsuccessfully applied for a newly created role during a redundancy exercise. The employer complied with this request, but only after it had already decided to dismiss H. H then brought a claim for unfair dismissal, alleging that the selection process was unfair.

The Employment Tribunal (“ET”) found that the dismissal was unfair but its decision was overturned on appeal by the Employment Appeal Tribunal (“EAT”) in Scotland. It was not the case that a redundancy dismissal would be unfair unless every request for information was granted and the information provided in response to the request consulted about prior to the decision to dismiss being made. The employee’s request in this case had been made without a justification being given and the employer had no reason to believe that it related to a particular issue which needed to be consulted about before the decision was made.

In practical terms, if an employer receives a request for specific information during a redundancy consultation process, where it is appropriate to provide that information the employer should ensure that it does so in a timely manner. Clearly where an employer makes a decision to dismiss with requests for information still outstanding there is a risk of the employer being accused of reaching a decision without having completed the consultation process, and therefore dismissing the employee unfairly. However, this case demonstrates that ultimately a Tribunal should consider the overall fairness of the procedure, and it will not always be the case that every request for information must be complied with before a decision to dismiss is made.

The Pool For Selection

Part of a fair redundancy selection process involves identifying an appropriate ‘pool’ from which those who are to be made redundant will be provisionally selected. Occasionally when an individual’s role is considered to be unique, employers take the approach that it is appropriate to select a particular employee from a “pool of one”, rather than putting other colleagues at risk of redundancy. Two contrasting recent decisions shed some light on the circumstances in which the courts will find this to be fair or unfair.

In Halpin v Sandpiper Books, the employer, a book distributor, wanted to expand into the Chinese market and Mr Halpin was posted to China to undertake a sales role. A decision was subsequently made to outsource the sales work to a local agency. Mr Halpin’s position was made redundant. He was treated by his employer as being in a selection pool of one for the purposes of redundancy, and he brought a claim for unfair dismissal. The EAT upheld the ET decision that a selection pool of one was fair in the circumstances. Mr Halpin was the only employee based in China and there were no other similarly qualified possible targets for redundancy. Employers may take some encouragement from the EAT’s comment that pools for selection are matters for management and the ET should rarely interfere with them.

However, Halpin is in direct contrast with another case decided by the EAT in the same month. In Capita Hartshead v Byard, a redundancy pool of one was held to be unfair. The employee (B) worked as an actuary alongside three other actuaries, who each managed assets owned by pension funds. B’s clients diminished, through no fault of her own, and she was made redundant. The ET found that the employer’s decision to limit the size of the pool to just B was unfair as there were three other actuaries doing similar work and, although a named actuary had to be appointed for each pension fund, the risk of the employer losing business if the identity of a scheme actuary was changed was only slight.

These two cases demonstrate that, although the question of how the pool for selection should be defined is primarily a matter for the employer, the Employment Tribunal may still scrutinise the employer’s choice of pool and must be satisfied that the employer acted reasonably in the individual circumstances of the case. While employers have a certain amount of discretion, they must always be able to justify the pool for selection as being reasonable. While a “pool of one” may in some circumstances be reasonable this will certainly not always be the case.

Offering Alternative Employment

An employer should do what it can so far as is reasonable to seek alternative work for employees at risk of redundancy. Samsung Electronics v Monte D’Cruz explored the issue of how an employer should approach the selection process for any such alternative job. The employee (M) was made redundant following a reorganisation. He was interviewed for a newly created role but was unsuccessful. The employer used the core competencies from its appraisal process in determining the best candidate for this newly created role. These were: creativity, challenge, speed, strategic focus, simplicity, self-control/empowerment, customer focus, crisis awareness, continuous innovation and teamwork/leadership.

The ET found that the criteria applied in the interview process were unsatisfactory, in particular the core competencies used for selection were “liable to subjective interpretation”. However the EAT, in allowing the employer’s appeal, found that the subjectivity of the process did not in this case make the dismissal unfair, commenting that “’Subjectivity’ is often used in this and similar contexts as a dirty word. But the fact is that not all aspects of the performance or value of an employee lend themselves to objective measurement, and there is no obligation on an employer always to use criteria which are capable of such measurement, and certainly not in the context of an interview for alternative employment”.

Readman v Devon Primary Care was concerned with the treatment of redundancy payment rather than an unfair dismissal claim for reason of redundancy. An employee may lose their right to a statutory redundancy payment if they unreasonably refuse a suitable offer of new employment from their employer. However, in this case the EAT held that an employee can act reasonably in refusing an offer of suitable alternative employment, even where the ET correctly concludes that a reasonable employee would have accepted the employer's offer, so long as the employee’s main reason(s) for refusal were sound and justifiable. The employee (R), a community nurse, was placed at risk of redundancy and her employer offered her the position of hospital matron, which was considered suitable alternative employment. R refused this post on the grounds that, having worked in community nursing since 1985, she had no desire to return to a hospital setting. This constituted a sound and justifiable reason for turning down the offer, despite the fact that “in the background” R considered that she might like to emigrate to Canada and take advantage of her redundancy rights and benefits.

Conclusion

Redundancy can prove to be a disruptive and stressful exercise for employees and employers alike. Employers, whilst trying to navigate their organisations through the proposed changes with the minimum amount of pain, must ensure that they act reasonably and fairly in handling a redundancy situation. If procedural slip ups are made, employers may well open themselves up to unwanted unfair dismissal claims, and legal advice should be taken at an early stage.

Graham Richardson is a Director in employment law at national law firm Dickinson Dees. He can be contacted on 0191 279 9456 or by This email address is being protected from spambots. You need JavaScript enabled to view it..