Redundancy Processes – How constrained are you?

Katie Clark, a Partner in the Employment team at McDermott Will & Emery gives comfort to smaller businesses that may be concerned about the redundancy process.

 

Employment lawyers can irritate their clients (we know it’s true!) by advising that, in order for a redundancy dismissal to be fair, a particular procedure needs to be followed to achieve “fairness” in the eyes of the Tribunal.

You’ve probably heard it enough, but in case you need a reminder, that process usually goes like this:

  • construct business case.
  • consider future needs of the business and put together wholly objective selection criteria which are as objective as is practicable.
  • Hold two, preferably three, individual consultation meetings with the affected employees about a “proposal” before you make a final decision.  Discuss until you are all bored silly and have nothing else to say.
  • identify existing vacancies within your organisation or wider group to see whether any of them are “suitable” for the person who would otherwise be made redundant.
  • have a dismissal meeting giving the right to be accompanied and offer an appeal process.

But is this really necessary in every case? Does every employer, no matter how small, have to do this for every redundancy no matter how clear cut and inevitable?

Well the elements, which are often recited as necessary to constitute  proper process in the eyes of a Tribunal, have built up over time. The process set out above is not proscribed by statute. In fact the generally prevailing ideas about what is necessary come, in the most part, from cases involving large scale redundancy exercises by big employers who have sophisticated HR support and often in unionised environments.

I would argue that the process which may be needed to demonstrate that a decision to make an employee redundant in a big, well resourced, employer is “reasonable” may well not be necessary for a small employer. In fact, applying a big firm approach in a smaller business, where people know more about what is going on in the enterprise as a whole, may not just be a classic sledgehammer and nut issue but artificial and destructive.

So, does the law impose only one view of what is reasonable on everyone?

No, it does not. In fact statute explicitly requires that the circumstances of the employer (“including the size and administrative resources of the employer’s undertaking”) are taken into account by a Tribunal when deciding if a dismissal is fair or unfair.

Many lawyers and some Tribunals seem to have forgotten this. The key question is whether the particular employer, faced with its issues and doing its best with the resources it has, acted reasonably in the particular instance.

Hence it will frequently be possible for a small employer to devise a process which is quicker and avoids just “going through the motions” where it is clear that no useful purpose would be served by doing so.

For all employers, how you make the decision to dismiss and how you go about the process really does matter. But it is wrong to think  that only a  full bells and whistles process will make a redundancy dismissal fair and avoid an award from a Tribunal. There are different ways to achieve reasonableness in any given situation. What may be the right thing for a big employer may simply be overkill for a smaller one.

The good news is that the Employment Appeal Tribunal (the EAT) has recently supported this view in a number of cases.

The EAT has even suggested that, just because there wasn’t meaningful consultation before a decision to dismiss was made, didn’t necessarily make the redundancy dismissal unfair.  That raised a few eyebrows, but it is a finding based on sound law.  Remember, the test for unfair dismissal is whether it was reasonable in all the circumstances (including the size and administrative resources of the employer) for the employer to make the employee redundant.

If the decision is commercially patently obvious then it quite arguably could be reasonable to make the employee redundant with more limited consultation than the three meetings some argue is the minimum required.

Similarly, a claimant’s argument that it was unfair for a small employer to decide who to make redundant based on a wholly subjective view of who it could most afford to lose was unsuccessful at the EAT.  The EAT rejected the notion that redundancy selection criteria can only be valid if they can be objectively “scored and assessed”.

Most small employers will not end up in front of a Tribunal. However, they may face allegations of unfairness from an employee adviser negotiating an exit package on behalf of a dismissed former employee.

More than at any other time in the last 10 years, when negotiating exit packages, small employers (large employers with significant HR departments will not be in the same position), can point to EAT decisions which take a common sense approach and have decided that a light touch procedure in a redundancy process that is otherwise well thought through will not be enough to render it unfair.

However, the business rationale must bear scrutiny.  We find that quite often, on close examination, a role that is said to have become surplus to requir