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Redundancy remains relevant – does your organisation know the ropes?

Today’s news headlines frequently remind us about the slow and long road towards economic recovery. In recent months we have even been threatened with double dip recession. Either way, the outlook remains worrying for both employers and employees. Ultimately, this means that redundancies are still a very real possibility for many of us.
Many employers are well aware that effecting a fair redundancy process requires the utmost care to be taken throughout. There are a number of basic steps an employer should follow when considering making redundancies within their organisation. As a quick reminder, these are:

Identify a genuine redundancy situationIs there a closure of the business or place of business; or is there a reduced requirement for employees to carry out work of a particular kind?
How many redundancies are necessary? Remember that collective consultation and notification to the Secretary of State will be required where 20 or more redundancies are proposed within a 90 day period.
Identify a selection pool and selection criteria and list alternative vacanciesCareful consideration should be afforded to which employees fall within the selection pool; only objective selection criteria should be engaged; and possible alternative vacancies within the organisation should be explored.
Hold a first meeting with affected employeesThis can be a group meeting with all those employees whom the organisation has identified has falling within the relevant selection pool. The purpose of the meeting is to explain the reasons for the potential redundancies; advise how many posts may be made redundant; explain the selection pool and selection criteria; suggest ways in which the organisation is attempting to avoid redundancies; and advise employees of their right to take time off to seek alternative employment.
“At risk” letterThe main purpose of this letter is to confirm, in writing, to employees that they are “at risk” of redundancy and reiterate the content of the first meeting. A copy of the selection criteria and scoring guidelines could be included for clarity and transparency.
ScoringEach “at risk” employee should then be scored against the same selection criteria by at least two managers to ensure objectivity.
“Provisional selection” letterEmployees should be advised that they have been provisionally selected for redundancy and should be invited to attend a meeting to discuss their scoring. Remember to advise employees that no final decision has been made at this stage.
First individual consultation meetingThis is a particularly important step in a fair redundancy process – consider the employee’s comments and discuss the basis of the selection pool, selection criteria and the organisation’s reasons for making redundancies. 
Follow up…To effect meaningful and constructive consultation, follow up on any issues raised by the employee at the first individual meeting. In particular, consider alternatives to redundancy and whether any changes to scoring at this stage will affect which individuals have been provisionally selected for redundancy. 
Second individual meetingThe purpose of this second meeting is to confirm selection for redundancy and go through the relevant redundancy package, be it statutory or contractual. 
Dismissal letterConfirm the decision to terminate the employee’s contract in writing; advise of the relevant termination date and whether the employee will be paid in lieu of any element of their notice period; set out the calculation of the redundancy payment (and any other payment such as accrued but untaken holiday); and advise of the right of appeal.
Appeal processIn the event of an appeal from an employee, hold an appeal hearing and advise them of the outcome in writing.

Unfortunately, carrying out a fair redundancy process is not as easy as “1, 2, 3… ”.  We must look to the caselaw for pointers on how each of the above procedural steps can be fairly carried out. The EAT has recently handed down two helpful decisions for employers relating, in particular, to selection pools and suitable alternative employment.
It is crucial that an employer identifies the correct selection pool at the outset of a redundancy process. The claimant in Halpin v Sandpiper Books Ltd UKEAT/0171/11/LA challenged exactly that aspect of the process to allege that he had been unfairly dismissed. The claimant had been working as the respondent’s only employee in China. However, the respondent decided that the requirement for employees to carry out sales work in China had diminished. The respondent’s intention was to explore the possibility of outsourcing this work to local agents. The respondent therefore identified a selection pool of “one” as being at risk of redundancy, namely the claimant. The Tribunal viewed this decision to outsource the claimant’s work as a business decision taken by the respondent’s managing director and one which the Tribunal could not question.
The claimant in Halpin was offered alternative work by the respondent, but he refused. Instead he went on to claim that the decision to dismiss him by reason of redundancy was unfair solely because the respondent had identified a selection pool of “one” and that the Tribunal had erred in law by failing to take this into account. The EAT dismissed the claimant’s appeal and reiterated the well-known principle that a Tribunal must not substitute its own view for that of the employer’s. Indeed, the EAT specifically noted that the respondent’s decision to identify a pool of only one “was not only open to it; it is one that a Tribunal could not easily overturn”. In this particular case, the EAT commented that the respondent’s decision to identify a selection pool of one was “logical” and it was a “management decision that the China job should cease”. This management decision naturally meant that the claimant’s post was redundant and he was therefore put “at risk”.
In summary, this decision of the EAT is helpful confirmation to employers that:

a redundancy selection pool can consist of only one employee; 
the decision as to the make-up of a selection pool is one for management; and
provided such a decision is one which was reasonably open to management, a Tribunal will find it very difficult to subsequently interfere.

Another recent EAT decision focuses on a different step in the redundancy process, namely the provision of suitable alternative vacancies. Over the years, this requirement has caused many a headache for employers. Helpfully, the decision in Samsung Electronics (UK) Ltd v Monte D’Cruz UKEAT/0039/11 goes some way to addressing the following issue: is an employer bound to appoint a potentially redundant employee to an alternative vacancy where they are not the “best person for the job”? No, says the EAT.
The claimant in Samsung was one of three Heads of Department whose roles were put at risk of redundancy during a reorganisation. The three roles were to be merged into a new, single Head of Sales role. The claimant applied for that new role, the alternative vacancy. On the basis of a presentation and questions at interview, the respondent scored the claimant on his creativity, challenge, speed, strategic focus, simplicity, self-control/empowerment, customer focus, crisis awareness, continuous innovation and teamwork/leadership. After an interview process, the claimant was unsuccessful. The claimant applied for a second alternative vacancy but was again unsuccessful and was consequently dismissed by reason of redundancy. The respondent eventually appointed an external candidate to the second vacancy. The Tribunal found that the dismissal was unfair, partly on the basis that certain of the interview criteria used by the respondent when selecting the candidate for both alternative vacancies had been “subjective”.
The EAT disagreed with the Tribunal and allowed the respondent’s appeal. It found that the Tribunal had erred in substituting its own judgment for the respondent’s view of the claimant’s suitability for the role. The EAT clearly states that “not all aspects of the performance or value of an employee lend themselves to objective measurement”. The positive lesson for employers to learn from this decision is that there is no obligation to resolutely use objective criteria in the context of an interview for alternative employment. The EAT went further to suggest that the very nature of the alternative employment in the Samsung case justified an element of subjectivity in the respondent’s assessment of the claimant’s suitability for the role. Moreover, the EAT adopted the approach in the case of Morgan v Welsh Rugby Union [2011] IRLR 376, in which HH Judge Richardson noted that “an employer’s assessment of which candidate will best perform in a new role is likely to involve a substantial element of judgment”.
Once again, the EAT uttered a warning against substitution: the Tribunal could not substitute its view that it would have been better to use a person specification to assess the alternative vacancy and, in all likelihood, identify the claimant as the best person for the job. In summary, this case reassured employers that a degree of subjectivity in an interview process for alternative vacancies will not render a redundancy dismissal unfair – hands are not tied to a particular candidate purely by virtue of a redundancy situation.
These two recent decisions of the EAT highlight that redundancy dismissals can be far from straightforward. If your organisation is considering making redundancies in light of the prolonged economic downturn, please do not hesitate to contact us and we would be happy to guide you through what is invariably a difficult process for both employers and employees alike.
For further advice and guidance relating to Employment Law and redundancies, please contact Robert Holland.