December 19, 2013

Who should stay…and who should go?

Redundancy is never pleasant – but it’s just one of the things that businesses sometimes need to do to survive and remain competitive.

Handling the redundancy process can be time consuming and of course costly if a business gets it wrong. There are many key steps to follow, which include:

  • Proper consultation
  • Applying your mind to the pool for selection
  • Looking seriously at whether there are alternatives to redundancy
  • Asking for volunteers
  • Offering alternative work
  • Giving time off
  • Adopting fair selection criteria

The matter of Selection Criteria has been the source of much case law and its application in a redundancy situation can often give rise to litigation.

Who Decides What Criteria to Use?

It is well established that it is for the Employer to decide what selection criteria to use in a redundancy situation. A Tribunal is not entitled to substitute its own principles of selection for those of the Employer (on the basis of course that the Employer knows its business best and that the function of the Tribunal is not to re-open an internal process by putting itself in the Employer’s shoes).

This principle however does have its limits and a Tribunal does have discretion to interfere in cases where no reasonable employer would have adopted a particular set of criteria. As an example, in the case of Williams v Compare Maxim, the Employment Appeal Tribunal considered as unsatisfactory, the criteria adopted of ‘retaining of those staff who in the opinion of the managers concerned, would be able to keep the company viable’. Such criteria of course are far too subjective to include in a fair redundancy process.

Fair selection criteria

Modern practice is to use a selection scoring matrix, utilising a number of key factors, which may include some or all of the following (and of course others):

  • Absence
  • Lateness
  • Disciplinary Record
  • Length of Service
  • Performance
  • Qualifications

Can I Still Use Length of Service?

Length of service as a criteria used alone is now quite rare for a number of reasons, but most notably as a result of the introduction of Age Discrimination Law. However it can still be used provided it is utilised as part of a selection matrix involving other criteria. Using Length of Service alone is likely to lead to a breach of the Equality Act and should not be adopted.

What about the use of Absence Criteria?

Although it is legitimate to use absence as part of a selection process, special consideration may need to be given to those employees who may be deemed to have a Disability. It is important in such cases to exclude from the redundancy scoring any absences which are a result of an Employee’s disability. Advice should always be taken in such circumstances.

Does the Selection Criteria need to be Measurable and Objective, or can I rely on my Manager’s Opinion?

Clearly, the more measurable and objective the criteria you adopt, the less likely it will be that the Employee will be able to challenge it. However, it is recognised that a degree of subjectivity is inevitable in any redundancy exercise.

In the recent case of Mitchells of Lancaster v Tattershall the Employment Appeal Tribunal concluded that ‘the concept of a criterion only being valid if it can be scored or assessed causes us a little concern, as it would invoked to limit selection procedures to box-ticking exercises’ and ‘…just because criteria of this sort (subjective) are matters of judgment, it does not mean that they cannot be assessed in a dispassionate or objective way’.

Some subjectivity may be inevitable, but it is best avoided if possible. One way to make subjective criteria easier to justify is for an employer to rely on the assessment made by not just one Manager but by several. That way, an Employee is less likely to be able to say that his assessment was biased.

Relying on the opinions of others is acceptable. In the case of Eaton v King the Employment Appeal tribunal held that it was acceptable for a Senior Manager to rely on the assessments made by his Subordinates when carrying out a redundancy exercise. It should however be noted that this approach is likely only to be found fair where the assessment is only one element of the selection criteria used.

Even if I use Fair Criteria, Can I Still end up in Tribunal?

Although there is limited scope for a Tribunal to interfere in the Employer’s decision to adopt particular criteria, it is still vital that the Employer applies the criteria carefully and genuinely.

In the case of Bascetta v Santander the Employment Appeal Tribunal held that ‘An Employer who sets up a system of selection which can reasonably be described as fair and applies it without any overt signs of conduct which mars its unfairness will have done all that the law requires of him’.

It is important of course to be diligent when it comes to scoring an employee against the criteria. For example, if an Employer decides to use qualifications as one of the criteria, it will be important for him to ensure that the Employee’s personnel records are up to date and include relevant qualifications.

It will also be important for the Employer to be careful in deciding what weight to apply to a particular qualification. For example, a 1 day course in Word Processing should perhaps carry less weight than a Degree relevant to the job.

Similarly, if an element of the selection criteria is subjective, for example people management, it will be important to be able to support a score by identifying some examples of good or bad people management skills.

Further, if an Employee suggests, perhaps as part of an appeal process, that his selection was biased, or that there was an ulterior motive behind his selection, it will be important for the Employer to take this seriously and to properly investigate any such suggestions, to ensure that the criteria used have in fact been applied fairly and consistently.

Selection Criteria and Consultation

Consultation over the criteria to be adopted is of course one of the ways to help ensure that the criteria and its scoring stands up to scrutiny. As well as consultation with a recognised Trade Union or Employee Representative, consultation with the individual Employee must not be overlooked. Consultation with the Trade Unions or Employee Representatives will normally involve ways to avoid redundancy and the proposed selection criteria. Consultation with the individual is vital for the purpose of explaining their own personal situations and to give them an opportunity to comment on their assessments. In the case of Heron v Citylink the Employment Appeal Tribunal made it clear that Even in an apparently clear case there may be factors known to the Employee but unknown to the Employer which could cause the Employer to change his mind’.

Perhaps the large volume of redundancies associated with the financial crisis is beginning to taper off, but redundancies will always arise in our modern world and it is important to follow proper procedures and to take proper advice from the outset and at all stages throughout it.

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