Employers
making redundancies face far more risks than ever before, thanks to changes to
the unfair dismissal law. Christopher Mordue explains the practical and
procedural steps that will help employers protect themselves against such
liabilities
Unfair
dismissal claims are a constant hazard for employers. But in the current
economic climate, as employers in all sectors shed jobs at a higher rate,
vulnerability to unfair dismissal claims is correspondingly increased. Since
the last recession, the unfair dismissal regime has been transformed. The
qualifying period for bringing a claim has been reduced to one year. Many
fixed-term contracts no longer have valid waivers of the right to claim unfair
dismissal if the contract is not renewed. The stakes are higher too, with the
current maximum award set at £51,700. While this maximum is rarely reached,
awards are likely to increase to reflect the reduced availability of
alternative work.
Fairness
is assessed by considering whether the process adopted by the employer, and the
decision to dismiss an employee through redundancy, lies within the range of
actions of a "reasonable" employer. The House of Lords has summarised
the employer’s obligation as to "warn and consult affected employees or
their representatives, adopt a fair basis on which to select for redundancy and
take such steps as may be reasonable to avoid or minimise redundancy by
redeployment within their own organisation."Â
The
first critical stage in making redundancies is to choose the pool from which
redundancies will be made. Employers have a wide discretion here – a tribunal
can only deem the pool unfair if it was one which no reasonable employer would
have chosen. But if the pool is not reasonable, the dismissal will almost
certainly be unfair. There is a natural tendency for employers to define the
pool narrowly, confining it to particular job descriptions, departments,
business units or contracts, to avoid the need to apply selection criteria.
This approach will not always be reasonable.
Employers
should consider whether there are other employees, outside their proposed pool,
who carry out similar types of work or have similar or interchangeable skills.
What will happen to the work of the redundant employees? If it will be absorbed
by another group of employees, that may indicate the need for a wider selection
pool. Similar employees, in other departments or working on other projects or
contracts, should only be excluded from the pool on strong commercial or
practical grounds, for example, because they have other essential skills,
knowledge or customer relationships not shared with those in the selection
pool.
Choosing
objective criteria
Where
selection for redundancy is required, the employer must use selection criteria
which are as objective as possible. Typically, the criteria will include
matters which are purely objective, such as length of service, attendance
records and disciplinary records. However, the employer will wish to retain
those employees who can contribute most to the future needs of the business.
The factors just mentioned would not, on their own, achieve this. It is
therefore usual to use other criteria, such as skills, knowledge, expertise and
experience. Other common criteria include performance, attitude and flexibility.
Some of these factors begin to introduce subjective measurements – that is, a
manager’s own personal opinion of the employee or their work attributes.
Subjectivity cannot necessarily be eliminated altogether, but the greater the
level of subjectivity, the more likely that the criteria will be
unreasonable.Â
How
can such factors be taken into account without an unreasonable level of
subjectivity? The key is not so much the labels used, but how they are scored.
"Performance" or "flexibility" on their own mean nothing.
Each criteria should be broken down into an exhaustive list of specific
measurements against which each employee is assessed. This prevents managers
from applying their own definitions to these terms or taking different factors
into account for different employees in the same pool. In the case of
blue-collar workers there may be existing data from which "quantity"
and "quality" of outputs, "efficiency" and
"accuracy" and so on, can be judged. For managers and other
white-collar staff, such data may not exist. Skills and experience may still be
taken into account, but performance and other "output" based criteria
should only be used if they can be scored against details.
Subjectivity
can also be reduced by avoiding "open" measurements which ask assessors
to make their own judgements. Instead, specific performance measurements should
be identified which are capable of a yes or no answer. If rating systems (for
example, scores from one to five) are used, managers must be given detailed
guidance as to what each point on the scale means so the scope for personal
interpretation is removed.
Selection
criteria should also be applied consistently, and managers should be directed
to specific sources of information which should be taken into account for each
employee. Assessors should also be required to provide supporting evidence or
comments for each score they award. This can be very important in consultation,
and ensures that there is a contemporaneous record of the assessor’s thought
process.Â
Avoiding
discrimination
When
choosing selection criteria, it is important to consider the risk of
discrimination claims. For example, pregnancy- and maternity-related absences
should not be taken into account when attendance is assessed. If flexibility is
used, this should not include matters such as an ability to work longer hours,
work weekends or travel – factors which could disadvantage those with childcare
or other domestic responsibilities and lead to claims of indirect
discrimination. Even considering the range of tasks which employees can
undertake may disadvantage part-time employees whose hours, or a commercial
need for continuity of input, restrict them from these tasks.
Particular
care must be taken to avoid discrimination against disabled employees under the
Disability Discrimination Act. The most obvious example is where a manager
fails to discount disability-related absences from assessments of attendance.
But disabled employees may also be disadvantaged in measurements of the quality
or quantity of their work, or criteria such as flexibility and performance.
Employers should consider what adjustments they need to make to the selection
criteria or their application to avoid discrimination or else ensure that
differential treatment is supported by justification. It is recommended that
specific legal or HR advice is obtained before selection criteria are used, to
identify and resolve potential issues of discrimination.
The
essence of individual consultation (see box for a suggestion of how this could
work) is that at each stage the employee is aware of the process envisaged and
the reasons for their selection for redundancy, and has an appropriate
opportunity at each stage to make comments or representations. Employers should also note that they must continue
the process of consultation, for example regarding alternative employment,
during the notice period. It may be unreasonable to make payments in lieu of
notice as this could deprive the employee of an opportunity to be considered
for alternative employment arising during what would have been the notice
period.
Only
if no such opportunities are foreseen or the employee is not interested in
pursuing these should you make a Pilon. Nor should employers assume employees
are not interested in working at other sites or for other group companies – the
employee should be left to decide the range of alternative employment to be
explored. In the case of women on maternity leave or disabled employees special
care should be taken to offer suitable alternative employment where it exists,
to avoid claims for discrimination or automatic unfair dismissal.
In
large scale redundancies, combining offers of enhanced redundancy terms with
compromise agreements may be unwieldy. Employers may not wish to open up many
different negotiations with a wide range of legal advisers. If there is a trade
union, it can provide the statutory advice for these purposes. Alternatively,
the employer could suggest one or two firms to employees, while leaving them
free to find their own advice – otherwise the independence of the designated
firms may be questioned.Â
Individual
consultation – an outline
–
Each individual in the pool is advised of the reasons for the redundancies and
alternatives to redundancy explored.
–
Individuals are advised of the selection criteria and their comments invited.
They should also be advised of the process and timetable for making the
assessment.
–
In particular employees are asked to provide any relevant information before
the criteria are applied.
–
Assessments are carried out, preferably by more than one manager. These are
reviewed by HR or a senior manager to check consistency of approach and that
criteria are being properly applied.
–
A league table of employees in the pool is produced.
–
Potentially redundant employees are invited to a series of further meetings at
which their assessment is reviewed in detail. The assessing managers should be
present. Each score under the selection criteria should be explained and
reference made to any supporting evidence taken into account. The employee
should have time to reflect on the assessment and then raise any questions or
objections. These should be considered by management and a detailed response
provided.
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–
Alternative employment opportunities are then explored. The details of the
redundancy package should be explained.
–
After allowing a suitable period for finding alternative employment, the
employer can give notice of dismissal. Employees may be given an opportunity to
appeal against their selection.
