Court of Appeal clarifies smaller-scale redundancy consultation requirements
Many of our readers will be aware of the need for careful preparation when planning a redundancy process, whether large or smaller-scale.
Unlike other employment processes, there is no statutory guidance, such as an Acas Code of Practice, on what will constitute a fair redundancy process, although there are statutory requirements for collective consultation (i.e. with employee representatives) where 20 or more dismissals are contemplated within a 90-day period. In order to understand what a tribunal might consider fair or unfair in a redundancy process, we need to consider guidance from case law. Employers should also ensure they follow any relevant redundancy policy and/or collective agreement.
Readers who are currently planning a redundancy process may wish to consult our Wrigleys' Essential Employment Guide to the Redundancy Process. Acas has also published useful non-statutory guidance on redundancies.
Essential Steps for a Fair Redundancy Process
The leading case on fair redundancy processes, Williams v Compair Maxam Ltd, indicates the importance of the following steps. (Readers should note that there are additional statutory requirements where collective redundancy consultation rules apply.) Where employers take a different approach to redundancy, they will need to be able to evidence very good reasons for doing so.
- Warn employees of the possibility of redundancies in good time;
- Consult on the following before making any decisions:
- the business case for redundancy; and
- the proposed timetable and process (including selection pools, selection processes and selection criteria);
- Conduct a transparent, fair, objective and non-discriminatory selection process;
- Conduct meaningful consultation with those at risk of redundancy, including consultation on any selection scoring / decisions;
- Seriously consider alternatives to redundancy, including seeking alternative employment for those who are at risk of redundancy; and
- Offer a right of appeal of any redundancy selection and dismissal decision.
We reported in October 2022 on the case of Mogane v Bradford Teaching Hospitals NHS Foundation Trust which emphasised the importance of consulting before any pooling decisions are made, particularly where there is a redundancy pool of only one employee.
A recent case has highlighted once again the importance of commencing consultation, whether with individuals or groups of affected staff before making any decisions, and of ensuring a thorough appeal process to review the redundancy process and decision-making.
Case details: De Bank Haycocks v ADP RPO UK Ltd
Mr De Bank Haycocks was employed by ADP, a recruitment process outsourcing business whose only significant client was the London office of Goldman Sachs. Due to the impact of the Covid-19 pandemic, ADP decided that it would have to make redundancies in the Claimant's team.
Before the employees were informed, the team manager carried out a scoring exercise applying a redundancy selection criteria matrix. The Claimant was awarded the lowest score in the team.
A consultation timetable was then set under which all staff in the pool would be informed individually that they were at risk of redundancy, followed by a 14-day consultation period before redundancy decisions were communicated to individuals. The number of redundancies contemplated was two, and so statutory collective redundancy consultation requirements did not apply.
During the consultation process, the Claimant was informed he was at risk of redundancy and of the business rationale for redundancies. He was told that the selection criteria and process which "will be used" to decide who was selected as redundant would be discussed during the consultation (even though in fact the criteria had already been applied).
Following the consultation period, which included considering alternative roles, the Claimant was given notice of dismissal. The Claimant was not told during the consultation what his scores had been, who had undertaken the scoring, or when the exercise had been carried out. He was only informed of his scores following the decision to dismiss.
The Claimant appealed this decision, asserting that his position was not redundant, that his scores were too low, that the selection criteria were unfair, and that he had not been consulted about his scores. The appeal investigated the process and decision-making but upheld the original dismissal decision.
The Claimant brought an unfair dismissal claim to an employment tribunal arguing, amongst other things, that he had not been properly consulted on the redundancy process and that his selection for redundancy was unfair. The tribunal did not uphold the claim. Although it found that the Claimant had not been consulted on his scores before the appeal stage, the tribunal decided that that ADP had carried out a conscientious investigation into his concerns about scoring during the appeal. The tribunal noted that the Claimant had failed to show that he had been unfairly selected as he had not evidenced that he had been unfairly marked down or that his colleagues should have been scored lower.
On appeal, the EAT disagreed with the tribunal. It held that the dismissal was unfair because there had been a lack of meaningful consultation by the employer at a stage where the employee could influence the outcome of the process. The EAT noted that "general workforce consultation" had not taken place in this case and stated that such consultation was part of good industrial relations practice in all redundancy situations, whether the workforce is unionised or not. It held that the appeal process in this case could not repair a "gap of consultation" in the formative stage.
ADP appealed to the Court of Appeal which overturned the decision of the EAT and reinstated the decision of the tribunal in the employer's favour. The Court of Appeal clarified that there is no requirement for "general workforce consultation" in redundancy situations where fewer than 20 dismissals are contemplated in a 90-day period.
The Court of Appeal held that there was no error of law in the tribunal's conclusion that the Claimant had been given a fair opportunity to challenge his scores on appeal and at a stage where the decision could still be influenced.
The Importance of Early Consultation
This case may provide employers with some reassurance that consultation with groups of employees, the wider workforce, or with employee representatives is not a necessary part of a smaller-scale redundancy exercise. In many cases, consulting with individuals will be sufficient where there is no recognised trade union or policy requiring wider consultation with the workforce.
Nevertheless, this case highlights the risks of making a pooling or selection decision before consulting with employees about the proposed process, whether in groups or individually. The Court of Appeal made clear that it was bad practice for ADP to carry out the scoring exercise before the consultation started, even though it agreed that the appeal process did allow the employee to challenge his scores so that he could still influence the final dismissal decision before it was made.
Despite this outcome, it is not advisable for employers to rely on an internal appeal process to "cure" a faulty redundancy process.
In this case, the employer has faced a very costly tribunal process and multiple appeals which might have been avoided. Taking legal advice before commencing a redundancy process and ensuring a fair process at the outset mitigate the risk of internal appeals and protracted litigation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
