What are the principles of a fair redundancy process?

Using the case of Mogane v Bradford Teaching Hospitals NHS Foundation Trust as an example, let's look at how can employers ensure a redundancy process is fair.

Background: The principles

Where selection criteria adopted for redundancy will automatically dictate who is selected for redundancy in a pool of one, employers must consult first about the proposed criteria.

Case law has established the principle of a fair redundancy process as follows:

• Employers should give as much warning as possible to affected employees of the need to make redundancies and will consult about possible alternative solutions to avoid or minimise the need for compulsory redundancies.
• Employers should consult about the method proposed in order to fairly select of those who are to be made redundant i.e. what selection criteria will be used.
• Selection criteria will be as objective as possible.
• Processes to apply selection criteria will be as fair as possible and will factor in representations from employees affected.
• Alternative employment will be considered prior to dismissal.
• Consultation is key and means giving those affected a real opportunity to understand the matters and give views which will be considered when the proposals are at a formative stage.
• Where there is a redundancy situation, an employer needs to determine (a) who should be in the pool of candidates to be considered for redundancy and then (b) decide how it will decide which employees in that pool will be selected.
• The pool of candidates to be considered for redundancy is primarily a matter for an employer to make, but must be within the range of reasonable responses. A Tribunal will not substitute its own view for a reasonable one advanced by an employer.
• Pools of one are capable of being reasonable but will be subject to more scrutiny by Tribunals around reasonableness where such a pool selection appears narrow on the facts.

Employment Appeal Tribunal decision

The Employment Appeal Tribunal found that:

• Consultation must take place at a formative stage (for individual and collective redundancy processes) because the whole point is that discussion must take place where it has the potential to change the outcome.
• In relation to the choice of pools for redundancy, tribunals should not easily interfere with an employer's decision but must be able to determine if there is a rational explanation for the pool and whether the pool is one that a reasonable employer could adopt in all the circumstances (and is not arbitrary between employees).
• Here, the decision-maker at the Trust decided that the person whose contract was up for renewal first should be selected for redundancy. This was an arbitrary way to decide and also effectively identified Mrs Mogane immediately as the person to be dismissed before any discussion had taken place with Mrs Mogane.
• The absence of meaningful consultation at a stage when Mrs Mogane had the potential to impact on the decision was indicative of an unfair process and her dismissal by reason of redundancy was, therefore, unfair.

What should employers take away from this?

In order that consultation is ‘genuine and meaningful’ a fair procedure requires that consultation takes place at a stage when an employee or employee representative can still, potentially, influence the outcome. There was clear evidence in this case that the decision maker had resolutely decided that the expiry date of the fixed term contracts would determine who would be dismissed before there was any discussion with the affected employee.

In circumstances where the choice of criteria adopted to select for redundancy has the practical result that the selection is made by that decision itself, consultation should take place prior to that decision being made.

It is unlikely to be reasonable for an employer to adopt the date of a fixed term expiring as the sole criterion for selection for redundancy, given how arbitrary such an approach is.

Employers should also remember that selecting fixed-term employees for redundancy where they are in a pool with permanent employees doing the same work will usually be unfair and is likely to amount to less favourable treatment (as a detriment) under the Fixed-term Employee Regulations, unless it can be objectively justified (for example, because the fixed-term employee was engaged for a specific task which has now been completed). 

This decision does not mean that employers are unable to progress redundancies using narrow pools for selection where that pool is plainly within the range of reasonable responses for an employer to make in the context of the redundancy situation (i.e., what savings needs to made and what work is there a lower requirement for).

Nor does it mean that applying objective selection criteria to a fair pool before you initiate consultation (in particular with those provisionally selected) would be unfair – so long as you do consult about the selection criteria used and/or how it was applied and are genuinely willing to consider representations on this and revisit either aspect.