Redundancy Fairness

Fairness in all the Circumstances

Even where the employer has established that there is a genuine redundancy situation, the tribunal must then decide if the employer acted fairly in all the circumstances in dismissing the employee.

An employer should always carefully consider the issues of fairness even before proceeding with a dismissal, whatever the reason including redundancy. 

Therefore, the tribunal has to decide whether the employer's decision to dismiss the employee fell within the band of reasonable responses that a reasonable employer in those circumstances and in that business might have adopted.  The tribunal must not substitute its own view for that of the employer.

In addition, the employer must follow a fair procedure.  It is important to remember that the ACAS Code does not apply to redundancies.

The leading case on reasonableness in relation to redundancy is Polkey v A E Dayton Services Ltd [1987] IRLR 503, in which the House of Lords held that an employer will not normally act reasonably (and a dismissal will therefore be unfair) unless it:

• warns and consults employees about the proposed redundancy;

• adopts a fair basis on which to select for redundancy, by identifying an appropriate pool and using fair selection criteria; and

• considers suitable alternative employment.

Individual consultation

The statutory right to collective consultation for redundancies of 20 or more is set out in Collective Redundancy. This page is concerned with the right not to be unfairly dismissed and covers the importance of consultation in the context of an individual unfair dismissal claim. The employer must give as much warning as possible of impending redundancies so that the affected employees may inform themselves of the facts, consider possible alternatives to redundancies and, if necessary, seek alternative employment. 

Pool for selection

Before selecting employees for dismissal on grounds of redundancy, the employer must consider the appropriate pool for selection.  It must show that the pool it adopted was within the range of reasonable responses open to an employer in the circumstances.

Selection criteria

In addition to considering the reasonableness of the selection pool, the tribunal will consider whether the selection criteria used by the employer are reasonable.  The criteria must be as objective and measurable as possible.

The Pool

Once the employer has chosen objective and measurable selection criteria, it must apply them fairly and objectively.  The tribunal is likely to be satisfied provided a reasonable system for selection and pool for selection has been established and can be shown to have been administered fairly. 

Scoring

Detailed analysis of the scoring systems is unlikely to be considered by the tribunal but may be presented if the scoring was wrong, but this can easily be spotted in an internal appeal of the redundancy. However, if the employee is alleging that the employer has failed to apply the criteria fairly, he/she would need strong evidence to challenge the scoring process. The tribunal will consider whether there has been a structured scoring process, carried out with an open mind and assessment by informed managers relaying on solid evidence, e.g. appraisals, statistics, customer feedback. 

During the consultation process, the employees should be consulted on the selection criteria chosen and how the selection criteria have been applied, both individually and in comparison with other employees.  The employer should carefully consider any challenge to the scoring as well as suggestions put forward by an employee. The employer should provide the employee with a copy of his/her own scores and should also consider disclosing additional information about the other employees’ scores, for example the average score for each criterion, where the scoring would otherwise be meaningless.

Bumped

Where an employee who has been ‘bumped’ (i.e. dismissed by reason of redundancy even though his/her own job still exists after the redundancy exercise), he/she should scrutinise the application of the selection criteria very carefully, to see whether they have been applied fairly.

Discrimination

An employer also needs to consider whether the criteria are potentially discriminatory.  Absence on maternity leave, pregnancy-related absence and disability-related absence should all be discounted if absence is included as a criterion for selection.

Alternative Employment

The employer should take reasonable steps to find the selected employees alternative employment within the organisation (or the group, if relevant) and should consult with them about it. The employer should ensure it gives the employees sufficient information about the vacancy and allow a trial period.  The employee must then consider whether he/she wants to accept the alternative employment, even if it involves a demotion or pay cut.

It is important to note that an employee who refuses suitable alternative employment will reduce their chances of winning an unfair dismissal case. In addition, they will lose their entitlement to the statutory redundancy payment if they unreasonably refuse the suitable alternative employment.

Practical guidance

The steps below are merely guidelines for dealing with redundancy fairly. Additional steps may be required, depending on the circumstances. The employer should also ensure they follow any company redundancy policy or collective agreement where applicable, and the collective consultation obligations where there are 20 or more proposed redundancies over a 90 day period:

• Identify need for redundancies

• Identify pool for selection and draw up selection criteria

• Initial staff meeting, warning of redundancy

• Score the employees in the pool

• Letter to potentially redundant employees inviting to consultation meeting

• Consultation meetings and follow up

• Consider alternative employment

• Written notice of decision to dismiss

• Appeal