Employment Update: Redundancy

13 February 2008

For a redundancy procedure to be fair, the recruitment procedure for any new post must be reasonable as well.

In the recent case of Ralph Martindale v Harris the Employment Tribunal had accepted that the employer faced an economic situation in which redundancies had to be made. It also accepted that the statutory dismissals procedure had been correctly followed. However it still decided that the dismissal was unfair.

The employer had decided to remove a layer of middle management. The employee was one of two individuals whose job was going to disappear but who had the qualifications to apply for a new post of 'director and general manager'. This new post was advertised internally and a third candidate applied (but was never a serious contender). The claimant was not successful either.

The tribunal said that (although it made no difference in the present case) the employer should not have opened up the possibility of applying for the new post to the entire workforce until it had established that neither of the two people at risk of redundancy were suitable for the post. It also found that the group director 'relied almost entirely on his subjective view as to the abilities of the candidates when making his decision as to who to appoint and that this made the dismissal unfair (although the tribunal applied a 50% Polkey deduction to allow for the fact that, even if the selection process had been fair, the claimant had only a 50% chance of getting the post).

The employer appealed to the EAT, arguing that a tribunal’s assessment of the fairness of a redundancy selection procedure should not include an assessment of the reasonableness of the recruitment procedure for any new post.

The EAT said that even though different criteria might apply, the tribunal had been entitled to consider the recruitment procedure for selection for the new post in deciding the fairness of the decision to dismiss.

Points to note ­–

  • For over 25 years, tribunals have required employers, when handling redundancy dismissals, to follow the guidelines on fairness as set out by the EAT in the 1982 case of Williams v Compair Maxam – that the employee should be given as much advance notice as possible; there should be proper consultation; fair and objective selection criteria and (where possible) an offer of suitable alternative employment. If these guidelines are followed, the employee should have no claim for unfair dismissal (although he or she will of course be entitled to redundancy payment).

  • The decision of the EAT in Ralph Martindale puts an additional burden on employers. There is to be no ‘slavish adherence’ to the guidelines in Williams v Compair Maxam. On the overall issue of fairness, a tribunal might (as in this case) consider the recruitment procedure for a new post in their decision as to whether a decision to dismiss was fair or not.
    From this decision employers should note in particular that it should not be ‘current industrial relations practice’ to have no objective criteria to rely on when deciding between two potentially redundant employees as to which of them should be appointed to any new post. Nor should the new post have been advertised internally to other candidates unless or until it had been established that neither of the potentially redundant employees were suitable for the post.

  • As redundancy is a potentially fair reason for dismissal, employers should ensure that their procedures for handling redundancies are completely up to date and in line with this latest analysis of ‘fairness’ in order to avoid claims. We shall be happy to advise further.