4. Selecting employees for redundancy

The selection process

In many workplaces where unions organise, there will be an agreed procedure for selecting for redundancy. A redundancy procedure will rarely be contractual. A typical example of the Court’s approach can be seen in Kaur v MG Rover (in chapter 6) where the Court of Appeal held that a collective agreement stating that there would be no compulsory redundancies was “aspirational” only, and had no legal effect.

Because a redundancy procedure is normally non-contractual, changing it is rarely a breach of contract (LTI v Radford EAT/164/00). As far as unfair dismissal is concerned, although a tribunal deciding whether a particular dismissal is fair will look at whether or not an agreed selection procedure was followed, departing from that procedure will not normally make a dismissal unfair where the change can be justified by, for example, changing business needs.

When negotiating changes to a selection procedure, it is worth always considering how the modifications would work for any future procedure. Even though a procedure is not contractual, in practice a concession once made by a union, may be hard to draw back from in future redundancy exercises, even though conditions are different.

Chapter 1 contains some current examples of redundancy procedures, produced for the purposes of the Labour Research Department’s (LRD) 2011 survey. LRD has collated many examples of redundancy procedures which are available to subscribers to the LRD Payline database — go to: www.lrd.org.uk/index.php?pagid=18 for details.

Redundancy selection procedures and the law

A landmark EAT decision, Williams and others v Compair Maxim (1982) IRLR 83, laid down some basic guidelines for employers to follow in order to carry out a fair redundancy dismissal. These are:

• give as much warning as possible of impending redundancies;

• consult representatives on the best way of causing as little hardship as possible to employees;

• draw up agreed selection criteria;

• as far as possible, make sure chosen selection criteria are capable of objective verification (for example, via attendance records) rather than depending just on the subjective opinion of the person making the selection;

• make the selection fairly, following the agreed criteria;

• consider any representations; and

• offer alternative employment where possible.

Volunteers

Employers often call for volunteers first, to avoid compulsory redundancies. An employer asking for volunteers does not have to apply the selection procedure to them. A failure to ask for volunteers first will not make compulsory redundancies unfair (Rogers and others v Vosper Thornycroft [1989] IRLR 82). An employer is not normally obliged to accept candidates who put themselves forward for voluntary redundancy. Employers will want to make sure that after the redundancy exercise, the business has retained the right skills mix. Terms for voluntary redundancy can (but will not necessarily) be better than those for compulsory redundancy. For practical examples, see Chapter 1.

The selection pool

Before an employer can apply the selection criteria, it must first decide on the group, or “pool”, of employees from whom redundancies are to be selected. The pool does not have to include only those employees who are doing the particular type of work that has reduced, particularly if roles are interchangeable. Indeed, restricting the pool in this way may make the dismissals unfair. For example:

“Bumping”

The law also allows a practice known as “bumping”. This is where an employee whose role is redundant is moved into another person’s job and that person is dismissed instead. The dismissed employee is able to claim redundancy because although his or her own job still exists, the dismissal is the result of redundancy. Failing to consider bumping can sometimes make a redundancy unfair. For example:

But a tribunal will also normally want to know whether the individual would have accepted the job if it had been offered. If not, little or no extra compensation is likely to be payable. This means that an employee who wants to be considered for a different position (whether or not more junior) should proactively raise this early in the consultation (preferably in writing). This will make it difficult for the employer to argue at a later date that the employee would not have been interested in the role if offered.

In Byrne v Arvin Meritor LVS (UK) Ltd EAT/239/02, the EAT clarified that an employer is not obliged to consider bumping in every case. It will always depend on individual circumstances. In Mr Byrne’s case, the employee had made it clear he would not accept a pay cut, and the only position into which he could have been moved was already filled by an employee who had been doing the job for some time and was paid £10,000 less. In those circumstances, the EAT held it was not unreasonable for the employer not to have considered bumping.

In practice, many human resources (HR) practitioners are reluctant to consider bumping and sceptical about allowing employees to work below their skill or qualification level, citing worries about de-motivation and the likelihood of staff leaving once the market recovers.

Carrying out redundancies through departmental reorganisation

Employers are increasingly likely to approach redundancies by carrying out a re-organisation or restructuring of the workplace, typically removing old roles, creating new roles and job descriptions and then inviting staff to apply for them.

In a recent important case, the EAT gave some new guidance about standards of fairness in a reorganisation. The case headlines a worrying new trend towards greater “flexibility” at the expense of transparency, and suggests that the established Compair Maxim guidelines for fair redundancy dismissal may apply only where employees are selected for redundancy out of a pool and not where individuals have to apply for “new jobs” created in a restructuring:

The more senior or managerial a role, the more likely a tribunal is to condone the degree of flexibility seen in Morgan v Welsh Rugby Union, but the decision is troubling for union reps and is a measure of the warning by the EAT in Compair Maxim that “these are not immutable principles which will stay unaltered forever. Practices and attitudes in industry change with time and new norms of acceptable industrial relations behaviour will emerge…These.are not principles of law but standards of behaviour.” The danger here for unions is that fairness, consistency and objectivity may be sacrificed by employers on the altar of HRM “flexibility”.

Selection criteria

Selection criteria should be chosen in consultation with the union, or with non-union reps or individuals if there is no recognised union.

Selection criteria must not be discriminatory

Although an employer has wide scope to decide on selection criteria, the chosen criteria must not be discriminatory. If the criteria and/or the process discriminate on the grounds of sex, race, disability, sexual orientation, transgender, religion or belief or age, marriage or civil partnership, pregnancy or maternity (or, in Northern Ireland, political opinion), they will be open to challenge under the Equality Act 2010 (or equivalent Northern Irish equality laws) as well as under unfair dismissal law.

The Equality and Human Rights Commission (EHRC) has produced a Code of Practice on Employment under the Equality Act 2010 which can be downloaded free of charge from its website at www.equalityhumanrights.com. Paragraphs 19:11 to 19:17 of the Code offer useful recommendations as to how to choose non-discriminatory selection criteria. In particular the EHRC recommends that employers:

• consult with any recognised trade union;

• use a selection matrix that contains several separate selection criteria, rather than just one; and

• ensure all chosen criteria are relevant and objective.

In practice, many selection criteria used in redundancy situations carry a risk of discrimination and where these criteria are unavoidable, employers should consider what reasonable adjustments are needed to reduce their discriminatory impact. Obvious examples include attendance, flexibility and language requirements, but there are many others. Disability-related mistakes in redundancy selection tend to be especially costly for employers, because of the potential for very large awards for future lost earnings, as tribunals recognise the severe problems faced by many disabled employees in a difficult job market. For example, in British Sugar v Kirker [1998] IRLR 624, an employee was awarded more than £100,000 when he was scored less favourably because an employer wrongly took account of his severe visual impairment.

Some selection criteria can be allocated more points than others

If some criteria are more important to the on-going business than others, they can be given higher weighting (i.e. more points can be allocated to them). It might, for example, be appropriate to award extra points for particular valued technical skills. “It is for the employer to select the appropriate skills it wish[es] to retain” (Bansi v Alpha Flight Services [2007] 1 ICR 308:27).

Selection method and scoring

An employer should consult on the method of selection, including scoring, and should apply chosen criteria fairly.

As long as the employer’s selection process is one that a “reasonable employer” could adopt, the law gives the employer a lot of freedom in choosing both selection criteria and the proposed selection method. In the absence of discrimination, bias or factual error (for example, making a decision based on a wrongly calculated absence record or length of service), a tribunal will rarely challenge an employer’s selection decision. In particular, a tribunal will never engage in close scrutiny of scores. All that is expected of the employer is a fair process, in which each individual employee has the opportunity to challenge his or her selection. “In general, the employer who sets up a system of selection which can reasonably be described as fair, and applies it without any overt sign of conduct which mars its fairness, will have done all that the law requires of him” (British Aerospace PLC v Green (1995 EWCA Civ26)).

The following recent case provides a good example:

An offer to deselect an employee facing redundancy only if she could nominate an alternative candidate made her dismissal unfair (Boulton and Paul v Arnold [1994] IRLR 532).

Another recent case illustrates how hard it is to challenge redundancy selection decisions:

If nothing else, the Dabson case underlines the importance of reps agreeing clear selection criteria and a scoring system everyone can understand. Failing to build in safeguards to check the accuracy or fairness of a redundancy selection process (such as arranging for a third party to re-mark the scores) will not make the dismissal unfair, as long as the employer has met the basic requirements of a fair process and there is no evidence of obvious mistake, although as always, each case will depend on its own facts:

Fair consultation involves providing an explanation for scores

A more encouraging decision is that of Pinewood Repro Limited t/a County Print v Page [2010] UKEAT 0028:

No obligation to hand over scores or assessments of other workers

An employer is not obliged to hand over the scores of other employees during the consultation process (Alexander and Hatherley v Bridgen Enterprises Ltd UKEAT/0107/04). However, if the redundancy is later challenged as discriminatory, it may be possible to access these scores (anonymised if necessary) through the statutory questionnaire procedure under the Equality Act 2010.

The opportunity to appeal

An employee should be given the chance to appeal against the dismissal decision. Wherever possible, the appeal should be heard by someone not involved in the redundancy selection. The EAT has held that a procedure that allowed the same person who carried out the assessment also to carry out the appeal was fundamentally flawed and the dismissal unfair (Romium v McMillan EATS/00007/03).

Is there a right to be accompanied?

Perhaps surprisingly, the statutory right to be accompanied by a trade union rep or fellow employee (section 10 of the Employment Relations Act 1999) is confined to disciplinary and grievance issues, and does not normally apply to redundancy consultation meetings (Heathmill Multimedia ASP Limited v Jones [2003] IRLR 856). Even so, it is best practice to allow employees to be accompanied to individual redundancy consultation meetings and this should be negotiated as a core right within any agreed redundancy procedure, along with the right to re-schedule the meeting to another reasonable date when the chosen rep is not available.

In any event, any meeting to discuss an individual grievance relating to the redundancy consultation process would trigger the right to be accompanied. This would include grievances about, for example, non-payment of statutory or contractual redundancy pay, or discrimination in selection for redundancy.

Acas Code of Practice on discipline and grievance 2009

The Acas Code of Practice on discipline and grievance 2009 does not apply to ordinary redundancy consultation meetings. However, it does apply to individual grievance meetings about the redundancy process. Breach of the Acas Code carries the possibility of an uplift (or reduction) of compensation (up to 25%) if either party acts unreasonably. Acas have published a separate guide to Redundancy handling which can be downloaded at: www.acas.org.uk/index.aspx?articleid=747.

Choosing selection criteria

Some selection criteria are “automatically unfair”

A redundancy dismissal will be automatically unfair under section 105 of the ERA 96 if the reason (or if more than one, the main reason) for the selection was one of the following:

• a union-related reason (including union recognition);

• participating in protected (i.e. official) industrial action;

• a health and safety reason;

• asserting a statutory right (for example, the right to request flexible working);

• taking or requesting leave for family reasons;

• being a trustee of a pension scheme;

• standing as a candidate for, acting as, or being elected as an employee representative for collective redundancy or TUPE purposes, or as a rep under the ICE Regulations or of a European Works Council;

• refusing to work on a Sunday (if the employer is a shop or betting shop worker);

• asserting a right under the Working Time Regulations;

• asserting rights under the National Minimum Wage Regulations;

• making a protected disclosure (whistle-blowing);

• asserting rights under the Tax Credits Act 2002;

• asserting a right protected by the Part-time Workers Regulations 2002;

• asserting a right protected by the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002;

• asserting a right to request flexible working;

• asserting a right to request time off to study and train;

• a reason related to a prohibited list (a “blacklist”) under the Employment Relations Act 1999 (Blacklists) Regulations 2010;

• asserting a right under the European Public Limited-Liability Company Regulations 2009; and

• being absent on jury service.

There is no need to have built up one year's service to claim unfair dismissal where redundancy relates to one of the reasons listed above. The right is available from the start of the employment.

Special categories of worker

Union members

It is automatically unfair to select individuals for redundancy because they are (or are not) trade union members. Section 153 of TULRCA says that if the reason (or if more than one, the main reason) for selecting an employee is (actual or proposed) trade union membership or activities, accessing trade union services, or refusing an inducement relating to trade union membership or collective bargaining, that selection will be unfair. For example:

The selection of two employees because they had been leading strike activists was also an automatically unfair dismissal (Britool v Roberts [1993] IRLR 481). So was selecting someone for redundancy because he spent too much time on union activities, even though the employer was not motivated to get rid of the employee because of those union activities (Dundon v GPT [1995] IRLR 403). Equally, an employer is not allowed to assess an employee based on skills demonstrated while carrying out their work as a safety rep (Smiths Industries v Rawlings [1996] IRLR 656). An employee’s duties as a trade union or safety rep should neither prejudice nor advantage a redundancy selection (Shipham v Skinner EAT/840/00).

But union reps should exercise care if moved to alternative work to allow them to accommodate trade union duties. In O’Dea v ISC Chemicals [1995] IRLR 599, the EAT ruled that it was fair to select a union rep for redundancy when the company no longer needed the alternative work he had been moved to, even though there was still a need for work in his original post.

Reps should do their best to maintain their skill and training levels in their original role. This is particularly important in the current climate, where outsourcing into the private sector under the Transfer of Undertaking Protection of Employment Regulations 2006 may result in pockets of unionised employees finding themselves transferred to a private sector employer who may not be prepared to agree to union recognition.

And when a TUPE transfer takes place, full-time reps will not necessarily transfer with the part of the business where they were employed before they became reps. Each case will depend on its own facts but, for example, in Birmingham City Council v Gaston(UKEAT/0508/03), a tribunal decided that a full-time shop steward did not transfer when the housing repairs division he originally worked in was outsourced to a private sector company.

“Blacklisted” employees

It is automatically unfair (section 104F of the ERA 96) to select an individual for redundancy where the reason for the selection relates to a prohibited list (a “blacklist” i.e. a list containing details of individuals who are or have been trade union members, or have taken part in trade union activities).

Employees who are pregnant or on maternity leave

Under section 99 of the ERA 96, selection for redundancy is automatically unfair if it is based on the fact that a woman is pregnant or on maternity leave. The House of Lords in 1987 said that selecting a woman for redundancy just because she was pregnant was unfair dismissal:

Sex discrimination and unfair dismissal

In 2011, an important new case modified the law on pregnancy and selection for redundancy. The effect of this case is to require employers to ensure any protection they give to pregnant women and those on maternity leave (for example, when selecting for redundancy) is proportionate and necessary, taking into account the interests of other (male and female) employees who would otherwise be disadvantaged:

Suitable alternative employment

Employees on maternity leave when their jobs are made redundant must be offered suitable alternative employment if this exists, regardless of the length of time they have been working. This important rule is looked at in detail in Chapter 5 (Offers of alternative work).

Shopworkers

A protected shop worker or betting worker (someone whose contract states that s/he is not required to work on a Sunday, or someone who has been continuously working as a shop worker since 26 August 1994 (the date when relevant parts of the Sunday Trading Act 1994 became law)) can claim unfair dismissal if s/he is selected for redundancy wholly or mainly due to a refusal to work on Sundays (or a particular Sunday).

Temporary employees

Any employee who works directly for the employer on a fixed-term contract (i.e. a contract which expires on a certain date or when a particular task is complete) is protected by the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (FTER), and must be treated in the same way as equivalent permanent employees.

Temporary employees and sex discrimination

As well as being a potential breach of the FTER, selection for redundancy on grounds of temporary status may also amount to indirect sex discrimination. In Whiffen v Milham Ford Girls’ School [2001] IRLR 468, the Court of Appeal held that a policy of selecting temporary employees first was indirectly discriminatory because there were proportionately more women than men in temporary posts.

Apprentices

Although it is not automatically unfair to select apprentices for redundancy, as a general rule, the law does not allow employers to make apprentices redundant, unless the business, or the part where the apprentice is employed, is effectively closing down. Apprentices who are wrongfully made redundant can bring a claim for their wages for the balance of the apprenticeship term, subject to a duty to take reasonable steps to mitigate their losses by, for example, completing their training with another employer. For example:

Choosing selection criteria in practice

As discussed above, employers commonly use a range of selection criteria which should be agreed with the union.

“Hard” and “soft” criteria

Employers are increasingly likely to want to use “soft” or “subjective” criteria such as “ability to work as a team”, “adaptability” and so on when selecting for redundancy. Unions are right to resist the excessive use of “soft” selection criteria and to try to ensure a good balance with “hard” or objective criteria, as well as to insist on clear, agreed guidance as to the meaning and scoring method for subjective criteria and an agreed review or checking mechanism, to try to reduce inconsistency and unfairness. In reality, it is impossible completely to eliminate hidden value judgments, line-management favouritism and personality issues when selecting for redundancies, but the challenge is much greater (and the potential for mistrust much higher) when managers insist on using subjective criteria, as the Court recognised when drawing up the Compair Maxim guidelines.

Examples of the range of criteria used (taken from the LRD 2011 survey of redundancy policies) are illustrated in the box below.

Particular criteria present recurring challenges, depending on the nature of the role, the organisation and the particular individuals facing redundancy. For example:

Flexibility

Each case depends on its individual facts but rewarding “flexibility”, for example willingness to relocate or to work unsocial hours, or to carry out a wide variety of tasks, may amount to disability discrimination. The employer should be encouraged to consider to what extent flexibility is a genuine requirement of the role and what reasonable adjustments can be made to remove individual disadvantage.

A requirement for flexibility of location or flexibility of hours (such as shift work or annualised hours, or willingness to work long hours at short notice) may also be indirectly discriminatory to women, as they are statistically more likely to have child-rearing responsibilities.

Language requirements

These are potentially discriminatory on grounds of race and nationality, but are likely to be justified where language requirements are genuinely relevant to the role.

Leadership skills, teamwork, customer service

Rewarding “people” skills such as leadership, team-work or customer service can be discriminatory on grounds of disability where a worker suffers from a mental health condition, such as Aspergers Syndrome, which can impair the ability to develop these skills. Again, the employer should consider whether the skills are genuinely relevant to the role under review and if so, should consider reasonable adjustments, such as training, redeployment or modifying the role, in consultation with the employee.

Up-to-date skills/training

An employee may score poorly on up-to-date training or skills because of absence on maternity leave or disability-related absence. If so, the employer should consider a reasonable adjustment to the scoring to remove the disadvantage. In the case of pregnancy/maternity discrimination, remember the need for the employer to be proportionate, taking into account the effect of the adjustment on others in the pool (see de Belin v Eversheds (2011) above. This requirement to consider the proportionate impact of the adjustment on others within the pool has no place in disability discrimination law.

Attendance, reliability and/or timekeeping

Attendance, reliability and/or time-keeping can all be acceptable as part of a range of selection criteria. It is legitimate for an employer to place a high value on reliability and punctuality but employers should structure the selection process to guard against employees being disadvantaged by, for example, a single unexpected event causing an absence (such as a one-off injury or illness). This can be done by examining average attendance over a longer period (Byrne v Castrol UK Limited EAT/429/96).

An LRD survey in 2010 found widespread adoption by employers of the Bradford factor model for calculating sickness absence, designed to penalise employees with a greater number of short absences as opposed to longer-term or “one-off” absences. Bradford factor statistics are frequently fed into redundancy selection matrices.

The case of Sanmina SLI UK Ltd v McCormack & others EATS/0066/05, confirmed that there is no general need for an employer to take account of the reasons for sickness absences. As always, the role of the tribunal is to look at whether selection criteria were fair and fairly applied and not to substitute its own view of what would be a fairer system. However, using “attendance” as a selection mechanism can have a disproportionate impact on women, because they tend to take more time off to care for sick dependents. This effect can be reduced by encouraging employers to select on the basis of as wide a range of criteria as possible, to ensure that no single criterion which is less favourable to one sex dominates the selection process.

It is automatically unfair to select an employee for redundancy for asserting (or proposing to assert) a statutory right, including the right to take unpaid parental leave, or unpaid time off (dependent leave) to deal with family emergencies. This includes making care arrangements for a dependent who is ill or injured, or because of unexpected disruption or termination of care arrangements, such as, for example, the temporary closure of a nursery.

Time off for pregnancy or maternity-related reasons should always be discounted.

Remember that taking into account disability-related absences is potentially discrimination arising from disability. This means an employer will need to consider what reasonable adjustments can be made to remove any disadvantage faced by a particular disabled employee at risk of redundancy.

Fear of redundancy has been identified by mental health charity MIND, the Chartered Society of Physiotherapists and others as being behind a worrying growth in the levels of “presenteeism” (coming to work when ill) seen in UK workplaces during the economic downturn (see LRD’s 2010 booklet, Sickness absence and sick pay).

Long term sickness absence

Employees on long-term sick leave and in receipt of sick pay can be included within the pool for redundancy. In rare cases where the employee is contractually entitled to a benefit such as permanent health insurance, there may be an argument that the employee should not be made redundant where ending the contract will prevent the employee continuing to access the benefit (Aspden v Webbs Poultry & Meat Group [1996] IRLR 521, but in Hill v General Accident [1998] IRLR 641, a Court rejected this argument, suggesting that it was “grossly disadvantageous” to those employees in the redundancy pool who happened to be well.

Redundancy selection and age discrimination

Last in, first out

Many agreed redundancy procedures use the criterion of last in, first out (LIFO), which protects employees with longer service from being selected before those with shorter service.

LIFO agreements have been questioned because of the risk of discrimination. However, it is generally accepted that having LIFO as one criterion for selection is acceptable, whereas using it as the only or most important criterion is open to challenge. In its Code of Practice, the Equality and Human Rights Commission recommends:

“‘Last in, first out’ may amount to indirect age discrimination against younger employees, indirect sex discrimination against women who may have shorter service due to time out for raising children, or indirect race discrimination where an employer might have only recently adopted policies that have had the effect of increasing the proportion of employees from ethnic minority backgrounds. But when used as one criterion among many within a fair selection procedure, LIFO can be a proportionate means of achieving the legitimate aim of rewarding loyalty and creating a stable workforce. If it is the only or the determinant (i.e. deciding) selection criterion, or if it is given excessive weight within the selection matrix, it could lead to discrimination.”

In Rolls-Royce plc v Unite the Union [2008] EWHC 2420 (QB), Unite challenged the employer’s decision to remove LIFO as one of the selection criteria. The High Court decided that length of service is likely to be a fair indicator of both loyalty and experience, which would not necessarily be covered by other selection criteria.

The Court also found that where the employer’s aim, in signing a collective agreement containing LIFO as a redundancy selection criteria, is to secure a peaceable process of selection, the employer is likely to have a defence to claims of age discrimination.

Finally, the High Court agreed with Unite that the use of LIFO was a length of service linked benefit that was capable of justification. The court stated, however, that it might have found the collective agreement “objectionable” if LIFO had been the only test (rather than one of a series of tests) used when selecting candidates for redundancy.

The abolition of the default retirement age

From 6 April 2011, it was no longer possible to issue new notices forcibly retiring employees at age 65. As a result, employers can no longer rely on compulsory retirement as a means of avoiding redundancies. This has significant implications for redundancy selection.

Employees aged 65 or over must now be included within the pool of employees at risk of redundancy and employers will be wary of including selection criteria that invite suggestions of age discrimination. Compensation awards, when age-based discrimination claims are successful, have the potential to be large because of a combination of factors: older employees may have long service, may find it difficult to secure a new job and may be earning at the higher end of their salary scale.

One practical consequence of the abolition of the default retirement age is likely to be far greater concentration by employers of all sizes on the use of formal appraisal processes and increased documenting of “performance management” issues throughout employment, so that when carrying out redundancy scoring using “performance-based” criteria, employers can draw on “objective” data to try to fend off accusations of age discrimination. But reps should be particularly wary to ensure that formal performance management is not inappropriately “stepped up” as employees approach what would have been the default retirement age. There is clearly also a risk of stereotyping by employers, especially surrounding hard-to-quantify and subjective criteria, such as flexibility, adaptability, technical skills and performance.

In a related development, several unions have been able to negotiate phased retirement policies for members.

Notice that notwithstanding other changes brought in to combat age discrimination, statutory redundancy pay is still capped at 20 years’ maximum service. Further information on statutory redundancy pay and age discrimination (including a discussion of a recent case on contractual redundancy pay and age-related tapering: Kraft Foods UK Limited v Hastie [2010] UKEAT 0024)) can be found in Chapter 6.