Redundant Employees were Unfairly Dismissed

In the EAT case of Contract Bottling Ltd v Cave (1) and McNaughton (2) it was held that the reason for the Appellants’ dismissals was, indeed, redundancy even though the jobs they had both performed continued to exist after their dismissals. How so?

The key statutory provision is section 139(1) of the ERA 1996, which defines redundancy in the following way:

“For the purposes of this Act an employee who is dismissed should be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—

(a) the fact that his employer has ceased or intends to cease—

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was employed, or

(b) the fact that the requirements of that business—

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

Have ceased or diminished or are expected to cease or diminish.”

In this case the employer’s case was that it had a reduced requirement for employees to carry out work of a particular kind. However, strangely, although the cuts were only needed amongst administration and accounts staff, it decided to put ALL its staff in the pool and apply a generic selection matrix in order to determine who would be dismissed. What this meant was that people were retained in administration and accounts and others from other departments where such a reduction in headcount was not required, were dismissed. The Employment Tribunal mistakenly held that, because the individuals who were dismissed were not from the departments where the reduction in headcount was needed, their dismissals could not have been by reason of redundancy. However, the EAT overturned this decision on the basis that it was perfectly clear that there was a reduced requirement in the company for employees to carry out work of a particular kind. It was irrelevant, for the purpose of the definition, whether the pool from which the staff were selected went beyond the areas where reduction in headcount was needed. What the pool for selection does is help determine whether or not the decision to dismiss for redundancy was fair.

As a result, the EAT upheld the company’s appeal against the Tribunal’s finding that the reason for the dismissals was not redundancy. However, it agreed with Tribunal’s finding that the dismissals were, nevertheless, unfair. It then remitted the case back to the original Tribunal for it to assess whether the compensation awarded to Cave and McNaughton should be subject to a Polkey reduction on the basis that they would likely have been dismissed anyway even if a fair procedure had been followed.

Interestingly, the original tribunal’s finding of unfair dismissal was not centred around the somewhat unusual (to put it mildly) pool for selection, but was instead highly critical of the process for selection from that pool. This case is therefore also useful as an illustration of how difficult it is for an employment tribunal to criticise the pool from which employees are selected for redundancy provided the employer can (a) show it has given real consideration to the pool and (b) provide evidence to establish that it was not outside the range of reasonable responses to select from such a pool.

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About Belinda Lester
As a specialist employment solicitor, my work is divided between litigation and non-contentious matters. I advise predominantly small to medium sized companies on their ongoing employment and HR issues, with a view to avoiding litigation where at all possible. At this time of economic uncertainty, many enquiries relate to company reorganisation/restructure and redundancies and I am able to give clear guidance through the processes associated with these issues. I have extensive experience of representing both Claimants and Respondents in the Employment Tribunal.

2 Responses to Redundant Employees were Unfairly Dismissed

  1. Alan Hunt says:

    I have not read this case in full but surely the essential phrase in the legislation is “of a particular kind”. If you do not do work of that particular kind why should you initially be put at risk of redundancy? I doubt that the employees would have been amused if a finding of a fair dismissal had been given by the EAT. Hopefully the ET will reject the Polkey argument effectively negating this EAT decision.

  2. There was reduction in the requirement for employees to do work of a particular kind and therefore there was a redundancy situation. Employers have a wide discretion in relation to determining the pool from which employees will be selected. In this case it was accepted that the employer had given due consideration to the pool and the tribunal was satisfied that, although the pool was unusually wide, it was nevertheless a valid pool. The unfairness of the dismissals was deemed to have arisen as a result of other procedural defects, not least of which being the criteria used in the selection matrix. The case has been remitted to the original tribunal to determine whether there should be a Polkey deduction as the employer argued that notwithstanding the procedural defects, the Claimants would have been dismissed anyway.

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