When employers have to select employees for redundancy they risk claims for unfair dismissal, as a recent case shows.
A recent decision from the Employment Appeal Tribunal (EAT) is a timely warning that departing from the conventional approach to selection criteria when deciding who to make redundant carries significant risks
Redundancy is a potentially fair reason for dismissal. However, there are significant traps for the unwary in carrying out such dismissals as employment tribunals make significant demands on employers in relation to the fairness of the process.
One of the leading case in relation to redundancy process is Polkey v A E Dayton Services Ltd (1987) in which the House of Lords outlined three key elements of a fair redundancy:
- Warning as early as possible and consulting meaningfully with employees about the proposed redundancies;
- Adopting a fair basis on which to select for redundancy; and
- Considering whether there is any suitable alternative employment available for affected employees.
Selection is an area where the elements of a fair process are well established. Not only must the employer decide on the appropriate pool from which to select redundant employees it must also use objective criteria, free from any taint of discrimination or element of subjectivity.
Selection scoring should be transparent so that individuals understand why they, rather than others, have been selected and should be capable of challenge so that obvious mistakes can be corrected. When criteria are as objective as possible they will also be capable of independent verification.
In Mental Health (UK) Limited v Biluan and another, the EAT considered a redundancy selection procedure which involved a series of competency tests normally used in the context of recruitment.
The selection process involved consideration of three criteria but with a competency assessment given more weight than the other criteria (which related to sickness absence and disciplinary record).
The selection process was carried out just by the employer's human resources team without input from managers who had worked with the individuals. Past appraisals were also ignored, as it was felt that there was insufficient reliable material on which to assess past or current performance.
As a result the competency assessment proved decisive in most cases and this led to some "very surprising" results in the employees who were selected for redundancy.
The EAT upheld an employment tribunal's finding of unfair dismissal. It considered that the employer's "blind faith in the process" had led to it losing touch with common sense and fairness.
While the capability and skills of employees going forward are very relevant considerations for a business which is restructuring, the case emphasises the importance of also being able to assess past performance fairly. A lack of reliable appraisals ultimately led to the employer in this case imposing an elaborate assessment process which, on a common sense view, was not fit for purpose as there was no input from managers who actually knew the individuals involved.
While a manager with experience of working with the individuals in question has an important role to play, any assessment should not depend solely on the opinion of one person but should be capable of verification by others.