Employment Update September 2009: Redundancy

28 September 2009

How to select an appropriate ‘pool’

In Lomond Motors Ltd v Clark the employer had decided that it needed fewer accountants. Although it had three accountants operating out of four locations, it decided that the choice lay between only two of them, one of whom was the claimant. As he had less service than the other, he was selected for redundancy.

The employment tribunal considered that, although it was undoubtedly a redundancy situation, the employer should have included the third accountant in the 'pool' for selection for redundancy and so the dismissal was procedurally unfair.

The EAT disagrees. The question for the tribunal in such a case is - was the selection method such as could have been determined on by a reasonable employer?

This means that employers have a wide measure of flexibility in determining the redundancy 'pool'.

It is quite acceptable for the employer to treat employees of the same kind (in this case, accountants) as being in different groups because that is how they are treated for management purposes.

Points to note -

  • Redundancy is a fair reason for dismissal but it is very easy for such a dismissal to become procedurally unfair, thus entitling the employee to unfair dismissal compensation. This case demonstrates that employers may be free to use their own management criteria to decide who should be included in a redundancy ‘pool’ and the extent to which employees doing the same job in different places are interchangeable. However, this is all subject to the general ‘reasonableness’ test. We shall be happy to advise further on how to ensure that all redundancies are handled fairly.

  • The EAT in this case also looked at the relevance or otherwise of contractual mobility clauses when dealing with redundancy. The answer is that a mobility clause is not relevant to an assessment of whether or not, in selecting the ‘pool’, the employer has acted reasonably. Put simply, if there is no need for employees of the claimant's kind at the place where he or she is currently working, there will be a 'place of work' redundancy.