Case round-up – Redundancy and protective awards

Ralph Martindale & Co Limited v Harris

Facts Due to a significant decline in orders, Ralph Martindale (RM) was required to reorganise the company and remove a layer of management.

Harris, group development executive, and Ensor, managing director of RM England, were informed that their roles were at risk. Both applied for the new alternative role of director and general manager. The vacancy was advertised and a third internal candidate applied.

The role was awarded to Ensor on the basis that he had a “less insular management style”. Harris claimed his redundancy was unfair as the selection process for the alternative role was not objective.

Decision The tribunal upheld Harris’ complaint. Although there is no requirement to consult with employees on the criteria for the alternative role, the selection process should be reasonable. The decision to appoint Ensor was based on an entirely subjective view, and there was no job description for the new role.

The tribunal also held that the role should not have been opened to other applicants prior to RM establishing that the redundant applicants were not suitable. RM’s procedure was not “current industrial relations practice”.

The EAT agreed with the tribunal and held that entirely subjective criteria are not appropriate when selecting for alternative employment. It confirmed that the tribunal was entitled to form its own view of the overall fairness. The tribunal is the “industrial jury” and is entitled to make up its own mind about what constitutes “good industrial practice” based on its own experience.

Implications This case highlights the importance of ensuring that the selection process for alternative roles in a redundancy is not an afterthought.

Shortcuts should not be taken as these may result in the redundancy being held to be unfair. Employers must offer alternative opportunities for redundant employees prior to opening up these roles to wider applicants.

Selection criteria should be as objective as possible and applied in a fair manner. To establish relevant criteria for alternative roles, it is recommended that employers draft a job description.

Evans & Or v Permacell Finesse Limited

Facts Permacell Finesse (PF) announced around 77 potential redundancies. As a result, PF was obliged to collectively consult for a minimum of 30 days. The company made no provision for the election of employee representatives and was therefore unable to consult with them. Several employees brought claims for a protective award for PF’s failure to collectively consult.

Decision The EAT uplifted the protective award made by the tribunal from 30 to 90 days. The EAT reiterated previous decisions stating that the protected award is punitive, rather than compensatory, in nature. The starting point for the calculation is 90 days, even if the minimum consultation period is 30 days. The award should be 90 days unless there are existing mitigating or other circumstances which would make it fair to consider a reduction.

Implications This case is a reminder to employers of the potentially substantial protective awards that can be incurred as a result of failing to collectively consult, even where the obligation to consult is for a minimum of 30 days. Affected employees can be awarded up to 90 days’ pay, which is not subject to any statutory cap.

Kat Fairbairn, associate, Addleshaw Goddard

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