Heidi Blakey finds that when undertaking redundancy, determining the correct selection pool is a key issue in avoiding legal challenges.

Dismissal on grounds of redundancy has arguably become simpler to justify in view of the economic downturn. Not only is it easier in these recessionary times to demonstrate that a redundancy is genuine, but we are also now free of the artifice of complying with the three-step dismissal procedure, following the repeal of the statutory dismissal procedures from 6 April 2009. Further, the ACAS Code of Practice clarifies that redundancy dismissals are helpfully excluded from its scope.

This is not to say that fair consultation is no longer required and it is evident that  the nature and scope of the consultation will still impact upon the general fairness and reasonableness of the decision to dismiss. However, the legal challenge for employers when carrying out a redundancy exercise is now likely to be re-focused on justifying the choice of the ‘pool’ out of which employees are selected.

Most redundancy programmes involve consideration of an appropriate selection pool and selection criteria. In broad terms, an employer should consider what particular kind of work is disappearing and which employees do that work in order to determine an appropriate pool. Selection criteria should be objective, reasonable and non-discriminatory. Length of service in particular as a criterion should be treated with caution as it may be deemed discriminatory on the grounds of age. However, employers should note that in the recent case of Rolls Royce v Unite the Union held that use of length of service, although indirectly discriminatory, was objectively justified in maintaining a stable workforce and rewarding loyalty.

If an employer can show that it has genuinely and reasonably applied its mind to who will form the selection pool and why, then it will be not be easily challenged by an employee or tribunal. A tribunal will only consider the reasonableness of the decision, i.e. whether the pool selected was within the range of reasonable responses and a tribunal must not substitute its own view for that of the employer. Employers must therefore ensure that they can provide sound reasons for the choice of pool focusing on the reality of the employment situation at hand.

The recent case of Lomond Motors Limited v Mr Robert Clark – a case dealing with a change in the place of work – illustrates employers can enjoy a high degree of flexibility and confidence in their choice of selection pool, if they can provide evidence of sound business judgment having been exercised.

Mr Clarke, a branch accountant for a motor dealership, agreed to work, for an unspecified time, for a wholly owned subsidiary. This involved a move from the Glasgow branch, to the subsidiary’s Stirling branch. In accepting the move Mr Clarke agreed that the other branch accountant for Lomond Motors, who assumed responsibility for the Glasgow/Ayr branches, would not have been able to perform the role at Stirling. 

The subsidiary acquired a fourth branch, and branch accountant, in Edinburgh. Lomond Motors then decided that only one accountant was needed to cover the Stirling and Edinburgh branches operated by the subsidiary – and so it concentrated its mind wholly on the subsidiary company in forming its selection pool.  Mr Clark and the Edinburgh branch accountant comprised the selection pool and Mr Clarke was selected.

The employment tribunal found that the decision to exclude the Glasgow/Ayr branch accountant from the selection pool was unreasonable and Mr Clarke’s dismissal was therefore unfair.
 
However the EAT allowed the employer’s appeal. The employer had done enough for the EAT to see that in all the circumstances it had made good business sense to approach the issue in the way that it had and the selection pool was reasonable. 

The employer was entitled to look at where the employee was in fact working at the time of the redundancy, without being bound by what he had done in the past or what he might do in the future. The two roles were not interchangeable, because the Glasgow/Ayr employee could not perform the Stirling role. 

The employment tribunal should not have substituted the selection pool it would have chosen with the pool a reasonable employer would have chosen and the pool in fact chosen on that occasion.

The EAT highlighted that, when faced with a claim, it is always worth bearing in mind that an employment tribunal may often find that another selection pool would have been fairer than the one adopted, but that will not in itself render a dismissal unfair.

Comment

As it is predicted that thousands of jobs will continue to be lost over the coming months, employers need to keep on top of the requirements for a fair redundancy. In any redundancy the focus should always be on the question of reasonableness. The pitfall of failing to demonstrate reasonableness is likely to be a finding of unfair dismissal and/or other related claims such as discrimination, meaning significant compensation may be payable to the employees in question.

Whilst employers are less likely to face challenges on procedural grounds following the exclusion of redundancy from the aforementioned ACAS Code, employers are now more likely to be challenged on their choice of selection pools. The Lombard case, however, demonstrates significant flexibility in the employer’s choice of pool if genuine business reasons can be shown.

Heidi Blakey is a senior solicitor at Davies Arnold Cooper LLP