Redundancy Consultation

25 July 2017

The test of reasonableness in unfair dismissal claims, as set out in section 98(4) of the Employment Rights Act 1996, plays an important role in a redundancy consultation when employees are required to compete for newly created posts following a restructure, the Employment Appeal Tribunal (‘EAT’) has determined.

In reaching their conclusion in the recent case of Green v London Borough of Barking and Dagenham (‘Green’), the EAT looked closely at the earlier cases of Williams v Compair Maxam (1982) (‘Williams’) and Morgan v Welsh Rugby Union (2011) (‘Morgan’).

It is well established from the case of Williams that, in applying the s98(4) test, an employer has to have proper redundancy criteria from which it selects the potential redundant employee(s). Williams laid down the following five principles for employers to adopt when considering which employees to select:

  1. To provide employees with an early warning about the proposed redundancies;
  2. Where there is a trade union, to consult with the union and seek to agree the selection criteria that is going to be used;
  3. If there is no union, to attempt to establish fair criteria for selection which does not depend only on the opinion of the person making the selection;
  4. Once the employer has decided upon the fair selection criteria, to ensure that the selection is made based on this criteria; and
  5. To consider alternative employment for the proposed redundant employees

In Morgan, the EAT ruled that the principles set out in Williams did not apply to cases where redundant employees were applying for new roles because “where an employer has to appoint to new roles after a reorganisation, the employer’s decision must of necessity be forward-looking. It is likely to centre upon an assessment of the ability of the individual to perform in the new role”. The EAT in Morgan therefore identified that there was a substantial element of judgment on the part of the employer when new roles were to be applied for.

Nevertheless, the EAT in Morgan did decide that a tribunal is “entitled, and no doubt will, consider as part of its deliberations whether an appointment was made capriciously, or out of favouritism or on personal grounds” and that “if it concludes that an appointment was made in that way, it is entitled to reflect that conclusion in its finding under s98(4)”.

In turning to the recent case of Green, the EAT has emphasised the importance of the s98(4) test. In this case, the Claimant was employed as a Senior Regeneration Professional along with two others in the same position. In October 2012, the Respondent carried out a restructure, which meant that the role of Senior Regeneration Professional would be abolished and two new roles would be created for the Claimant and her two colleagues to compete for by way of an unseen written test and interview.

The Claimant scored the lowest out of her colleagues when competing for one of the two new roles and was chosen for redundancy. She alleged that part of the recruitment process was unfair, namely that one of her colleagues had prior knowledge of the written test subject and that her appeal against dismissal had not been properly considered along with other matters that she had raised.

In the first instance, the Employment Tribunal decided that this was not a case where it needed to apply the principles laid down in Williams as the issue in question was not why the Claimant had been selected for redundancy, but why she had not been chosen for one of the two newly created roles. The case was therefore akin to the facts in Morgan which relied upon the fact that the appointment to new roles after a restructure places an element of judgment on the part of the employer.

The Claimant appealed and was successful. The EAT pointed out that the EAT itself in Morgan directs an employment tribunal back to s98(4) because it is critical that, at all times when considering the a dismissal, the reasonableness test must be the starting point in deciding if a dismissal is fair or unfair.

A lesson to be learned from this case is the importance that primary legislation plays in tribunals (and courts) reaching their decision. Yes, case law will continue to develop but, fundamentally, the first place to establish legal principles will be the legislation.

The case of Green is also interesting because the EAT felt that that the lower tribunal had not used enough detail to explain its findings. The case highlights the importance of how employment tribunals should clearly set out their judgments and follow a clear structure which sets out the issues they have to address and the reasons for coming to their decision.

By Emily Jones

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