Selection for redundancy

In many unionised workplaces, there will be an agreed procedure for redundancy selection. Redundancy selection procedures are rarely contractual. This means they can be changed, even without consultation or agreement, without breaching the employment contract. By contrast, an agreement about enhanced redundancy payments is more likely to create enforceable contractual obligations (see page 350).

In Kaur v MG Rover [2005] IRLR 40, the Court of Appeal held that a collective agreement containing a “no compulsory redundancies” clause did not make an employee’s redundancy unfair. It found that the clause was “aspirational” only and did not create binding contractual obligations.

An important EAT decision, Williams v Compair Maxim [1982] IRLR 83, laid down some basic guidelines for a fair redundancy dismissal. These guidelines apply irrespective of the number of employees at risk of redundancy. The guidelines say that employers should:

• give as much warning as possible of likely redundancies;

• consult reps 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 criteria can be verified objectively, for example, via attendance records, rather than relying on the subjective opinion of a manager;

• carry out the selection exercise fairly, following the agreed criteria;

• consider any representations; and

• offer alternative employment where possible.

Recent cases have seen some watering down of these guidelines, in particular where employers claim to be “restructuring” (i.e. eliminating roles), creating “new” jobs, inviting the existing workforce to apply and making unsuccessful applicants redundant.

For example, in Morgan v Welsh Rugby Union [2011] UKEAT/0314/10, the EAT suggested that an employer creating a new job in a restructuring will want to focus on a candidate’s ability to perform the new job in the future, rather than on their past performance. It was more acceptable in these circumstances, said the EAT, for the selection process to look more like a job interview than a consultation meeting, and for the employer to exercise substantial “judgment”, subject to an overriding duty to act “reasonably and fairly”.

In the Morgan case, the dismissal was judged fair despite significant deviation from the employer’s own procedure. The case was followed in Samsung Electronics (UK) Limited v Monte-d’Cruz [2012] UKEAT/0039/11. In this case, a dismissal following a restructuring was judged fair even though the employer disregarded evidence of past performance through performance appraisals; used “nebulous” selection criteria designed for annual performance review; made no attempt to make sure the selection panel shared a common understanding of the selection criteria, and filled the post with an external candidate.

The sort of approach seen in these cases is more likely to be judged by a tribunal to be fair in cases where the role demands high levels of discretion and creativity, and is higher paid.

Tougher, stricter standards, in line with the Compair Maxim guidelines, have been enforced in cases where redundancies are carried out through selection from a pool, where the job itself does not change but fewer employees are needed to do it, especially if those involved are not in senior or management roles. A good example is Mental Health Care (UK) Limited v Biluan [2012] UKEAT/0248/12/SM, a case involving redundancy dismissals from a pool of hospital staff on a ward. In this case, the EAT criticised the employer for a “blind faith in process”, and said that its use of “elaborate and HR-driven tests” led to the employer “losing touch with common sense and fairness”. The dismissals in this case were unfair.