As businesses and economic circumstances change and evolve, it is common for Employers to find themselves in a position where they feel that they need to make redundancies. This may be particularly relevant over the coming months with the Government’s furlough scheme due to begin winding down from 1st July 2021. In this month’s article, we therefore look at the key features and considerations in a fair redundancy process which often form the basis for unfair dismissal claims.   Please note that this article will focus on individual redundancy processes, where 20 or more redundancies are envisaged within a 90-day period, collective consultation obligations will arise.

A Genuine Redundancy Situation

The starting point in any claim where an employee has been dismissed on the grounds of redundancy, will be to establish whether a genuine redundancy situation existed within a Respondent business. 

The circumstances which meet the statutory definition of redundancy are set out at Article 174 of the Employment Rights (Northern Ireland) Order 1996 which identifies three situations in which a redundancy will occur:

• a business closure;
• a workplace closure (closure of a particular site, or relocation to a new site); or
• diminished requirement of the business for employees to do work of a particular kind.

A redundancy situation can arise from a reorganisation/restructure within a business, however the question as to whether such a restructure constitutes a redundancy is fact sensitive. In general, the law does not interfere with an employer’s freedom to make business decisions which may result in redundancies and an employer will not be required to justify its reasons provided that a Tribunal is satisfied that redundancy is the genuine reason for a dismissal.

Selection Pool

In any case concerning redundancy, a Tribunal will expect that an employer has applied its mind to the identity of an appropriate selection pool.  There are no fixed rules about how a selection pool should be defined and, unless provided for under an employer’s redundancy policy or collective agreement, an employer has a measure of flexibility and discretion in this regard.  When deciding whether an employee’s selection was unfair, a Tribunal will determine whether an employer’s choice of pool was within a range of reasonable responses which a reasonable employer would have adopted in the circumstances. Factors that are likely to be relevant when identifying an appropriate selection pool are:

• The type of work that is ceasing or diminishing;
• The number of employees carrying out that work;
• The extent to which other employees are doing similar work;
• The extent to which employee roles are interchangeable.

Selection Criteria

A common ground for challenging a redundancy is the appropriateness of the selection criteria used to select employees from a selection pool.  In order to be reasonable, redundancy selection criteria should as far as possible be objective and capable of independent verification.  This means that where possible, criteria should be measurable, rather than just being based on opinion.  In practice, HR records, such as appraisal records and attendance records are invaluable in such an exercise as they provide objective documentation upon which to score at risk employees.  Criteria which is subjective or selection on purely subjective grounds is likely to be deemed unfair (Williams v Compair Maxim) and therefore criteria such as “attitude” and management view on “suitability” should be avoided where at all possible. 

Employers should also be careful to avoid criteria which may indirectly discriminate against employees due to a protected characteristic.  For example, in the recent English Tribunal case of Gorton v TJ Crompton Ltd: 2414322/2019 a Tribunal found that a selection criteria of last in first out indirectly discriminated against younger staff members in the absence of justification.  In addition, criteria taking into account absences or leave due to disability and/or maternity is likely to be deemed discriminatory. 

Consultation/Procedure

A fair consultation process and procedure is crucial to the successful defence of any claim for unfair dismissal.  As confirmed in Polkey v AE Datyon Services Ltd (1987) IRLR 503, an employer will not normally have acted reasonably in the termination of an employee on the grounds of redundancy unless it warns and consults employees, or their representatives about the proposed redundancy.  The key components of a fair consultation were identified in R v British Coal Corporation and Secretary of State for Trade and Industry ex parte Price (1994) IRLR 72 which confirmed that any such process should include:

• Consultation when the proposals are still at a formative stage;
• Adequate information on which to respond;
• Adequate time in which to respond;
• Conscientious consideration of the response to the consultation.

In practice, a fair and meaningful consultation process should normally include:

• An opportunity for an employee to comment on the basis for selection, both in terms of the selection pool and criteria;
• An opportunity for the employee to challenge their redundancy selection assessment;
• An opportunity for the employee to put forward any suggestions for ways to avoid the redundancy;
• An opportunity for the employee to address any other matters or concerns that they may have.  

In particular, any consultation process and procedure should include consideration to whether alternatives to redundancy are available and whether alternative employment exists within the business. 

As with any dismissal, an employer should ensure that any process follows its own internal policies and the statutory dismissal procedure provided under The Employment (Northern Ireland) Order 2003 Schedule 1.  If any aspect of the “Three step” procedure is not followed, a dismissal is likely to be deemed unfair.