In practice, it is not uncommon for consultation with employees to begin only after the business has found that redundancies are inevitable. The consultation then usually focuses on selecting employees for redundancy; the number of employees to be made redundant, and the packages that will be offered to them. However, this Judgment highlights the risks of that approach for employers.
In practice, it is not uncommon for consultation with employees to begin only after the business has found that redundancies are inevitable. The consultation then usually focuses on selecting employees for redundancy; the number of employees to be made redundant, and the packages that will be offered to them. However, this Judgment highlights the risks of that approach for employers.
The background
Mr De Bank Haycocks (DBH) was employed as a recruitment consultant by ADP. He worked in a team of 16 employees who recruited solely for Goldman Sachs. As a result of the pandemic, the bank’s demand for new staff dropped radically, and by May 2020, ADP had decided it needed to reduce the number of employees in that client’s team.
ADP utilised a selection matrix devised by its US parent company (which entailed highly subjective criteria), according to which DBH scored lowest in his team. He was invited to an at risk meeting on 30 June 2020, where he was told that he could ask questions and suggest alternatives. He was invited to a further meeting on 8 July 2020 and to a final meeting on 14 July 2020, where he was notified of the termination of his employment on the grounds of redundancy. At no point prior to his dismissal was DBH provided with his selection scores or informed how he had scored against his peers.
DBH appealed against the decision. Prior to the appeal hearing, he was provided with his selection scores, but not those of his colleagues. The appeal was unsuccessful and DBH brought an unfair dismissal claim in the Employment Tribunal.
The Employment Tribunal held that DBH’s dismissal was fair, and that the selection process had been conducted in good faith. DBH had not been informed that another member of his team took voluntary redundancy, but the Tribunal did not find that this had affected the validity of the redundancy pool. It acknowledged that DBH had not been provided with his selection scores before his dismissal, but held that this procedural flaw had been rectified at the appeal stage.
DBH appealed to the Employment Appeal Tribunal (EAT) arguing that the Tribunal had failed to address the adequacy of the consultation process.
The EAT decision
The EAT upheld DBH’s appeal and substituted a finding of unfair dismissal. It found:
- There had been a clear absence of meaningful consultation at the formative stage of the redundancy process;
- The absence of consultation at a stage when employees could propose a different approach to the redundancy process and have opportunity to influence the employer’s decision was indicative of an unfair process; and
- Whilst the appeal had remedied the procedural failing that DBH had not been provided with his scores prior to dismissal, it could not rectify the fact that there had been no consultation with employees during the formative stage of the redundancy process.
The EAT reviewed existing case law authorities and set out the following guiding principles for a fair redundancy consultation:
- The employer will normally warn and consult either the employees affected or their representative(s);
- A fair consultation occurs when proposals are at a formative stage and adequate time and information is given for the employee to respond;
- Whether in collective or individual consultation, the purpose is to avoid dismissal and ameliorate the impact;
- A redundancy process must be viewed as a whole. An appeal may correct an earlier failing, making the process reasonable as a whole;
- The tribunal should examine the whole process, including the reason for dismissal, in deciding whether it is reasonable to dismiss;
- It is a question of fact and degree as to whether the consultation is adequate; it is not automatically unfair if there is failure to consult on a particular aspect;
- Any particular aspect of consultation, such as the use of scoring, is not essential to a fair process;
- The use of a scoring system does not make a process fair automatically; and
- The relevance of individual scores will depend upon the specific complaints raised.
The EAT also found that, in the circumstances of the case, ADP ought to have carried out a “general workforce consultation”. The EAT noted that for large scale redundancies (affecting 20 or more employees), statutory collective consultation legislation requires that employee or trade union representatives are consulted at the formative stage of the redundancy exercise. The procedure to be followed is less clear for unrepresented employees during small-scale redundancy processes. However, when conducting redundancies, the EAT held that “reasonableness” is the standard of good industrial relations practice that employers must meet. They should therefore afford employees sufficient information, the opportunity to propose alternatives to redundancy (such as an agreed pay cut, voluntary redundancy or early retirement) and adequate time to respond.
The EAT also highlighted that where there is an international dimension to a redundancy situation (as is increasingly common), what constitutes good industrial relations may vary significantly between jurisdictions. In this case, the US parent company’s subjective selection criteria did not reflect the usual practice in the UK, which further undermined the fairness of the procedure.
Conclusion
In conclusion, this Judgment reminds employers that the primary aim of redundancy consultation is to avoid dismissals or mitigate their impact. This applies to all redundancy exercises, and not just those caught by the collective consultation rules. Most importantly, a “tickbox” consultation process carried out after substantive decisions have been made is at risk of challenge, and may lead to findings of unfair dismissal and consequential reputational and financial challenges for the employer. Employers must be mindful too of the growing international element to redundancy processesand may need to seek advice on how to ensure that the process as a whole is fair and transparent.
