EAT emphasises importance of workforce redundancy consultation

The latest redundancy ruling from the Employment Appeal Tribunal has underlined the importance of workforce consultation, even in relatively small-scale redundancy exercises. In this case its absence made the dismissal unfair, even though the employers consulted the claimant at an individual level.

The employer – a UK subsidiary of a US company – needed to make redundancies among a group of 16 employees who worked for a single client, following a reduction in the level of demand for their services. The workforce was not unionised and the separate collective consultation requirements under trade union legislation were not triggered because the numbers involved were too small.

The UK manager was asked to score her term of 16 based on a redundancy selection matrix provided by the US parent company. Once all the team had been scored, the decision was made to make two people redundant, one of whom was the claimant. It was only once he had been provisionally selected for redundancy that he was consulted. He was not shown the other scores before he was dismissed, but was able to challenge the marking on appeal, though that did not change the decision to make him redundant.

The employment tribunal concluded that “he had not demonstrated...that his score should have resulted in a higher ranking” and decided that the dismissal was fair. It did not address the absence of consultation when the redundancy proposals were still at a formative stage.

The EAT has overturned the ET’s decision and substituted a finding that the dismissal had been unfair. According to the judgment, the lay members of the EAT believed that the historic case law on redundancy needed to be read in the light of two significant changes in the workplace since they were decided. The first was the fall in union membership, particularly in the private sector. The second was the increase in the incidence of overseas ownership of UK businesses.

In this case, these factors had led to a US-style redundancy selection process being applied to a UK business without the safety net of union representation. That had led to the omission of an essential ingredient of fair consultation – namely giving the people being consulted a genuine opportunity to influence the redundancy proposals. In smaller scale redundancies this stage of the consultation would typically have been conducted with union representatives. In today’s industrial relations climate employers are normally expected to consult directly with the workforce affected, if there are no union or other employee representatives in place, before proceeding to consult on an individual basis about the application of the chosen selection criteria to those individuals.

The EAT is not saying that workforce consultation will always be required in addition to individual consultation: like any other procedural step recognised in our case law, it is simply one recognised (but not necessarily essential) ingredient of a fair process. What is paramount is that the procedure adopted must be sufficient to satisfy the statutory test for a fair dismissal – ie that it must be defensible as a reasonable decision in all the circumstances.