Is early workforce consultation required for small scale redundancies?

For a redundancy process to be considered reasonable, it requires genuine and meaningful consultation. We previously wrote about the Employment Appeal Tribunal (EAT) decision in Mogane v. Bradford Teaching Hospitals in which the EAT found that it was unfair to dismiss an employee when the employer did not consult beforehand about a single selection criterion that inevitably led to a pool of one.

The EAT decision in De Bank Haycocks v ADP RPO UK Ltd provides further guidance on what will amount to a genuine consultation process and when consultation should begin if the threshold for collective consultation (20 or more redundancies at one establishment in a 90-day period) is not triggered.

Background

The claimant was one of 16 recruitment consultants employed in a UK subsidiary of a US parent company. Following the start of the coronavirus pandemic the demand for the team’s services diminished and a decision was taken to reduce the size of the team. The UK manager assessed all 16 employees using ’entirely subjective’ selection criteria given to the manager by the US parent company. The claimant came last in these rankings.

The US parent company subsequently decided that two roles from the team should be made redundant. One of the redundancies was satisfied by a volunteer. As the lowest scoring employee, the claimant was invited to a consultation meeting. He was given the opportunity to ask questions and suggest alternative approaches. He attended one further consultation meeting, followed by a final meeting during which he was handed a letter of dismissal. At no point was the claimant made aware of his score, nor how the rest of his team scored. The Claimant appealed and as part of this process was told his score (but not shown comparative scores).

Following his redundancy, the Employment Tribunal (ET) rejected the claimant’s claims of unfair dismissal. The ET held that the appeal process had been carried out conscientiously and that the claimant could not demonstrate that he should have been ranked higher. The claimant appealed, arguing that by the time he was consulted with, all the important decisions had been made.

The EAT’s decision

In reaching its decision, the EAT considered a number of guiding principles established through previous case law. For example, the EAT noted that to be fair consultation should take place when proposals were still at a ‘formative stage’ (British Coal Corporation Secretary for Industry ex parte Price & Others) and reiterated the findings in Mogane that early consultation is a necessary part of a fair process, unless the employer can explain why that is not appropriate. The EAT also noted the landmark 1982 decision (Williams v Compair Maxam Ltd) that in collective redundancies, as much warning as possible should be given on any proposed redundancies and that there should be consultation (in that case with unions) on selection. Subsequent cases confirmed that, even where the threshold for collective redundancy is not met, consultation should take place at a time when it can impact the outcome.

Workforce consultation at a formative stage

The EAT noted that a number of the leading cases on redundancy consultation requirements date back to the 1980s, when there was far greater union representation of employees and employers’ corporate structures were less likely to include an international element. Following the same approach as in Compair Maxam, the EAT’s view was that a reasonable dismissal should reflect good industrial relations.

Where there are representatives (such as a trade union) involved in a redundancy process, and regardless of whether the threshold is met for collective consultation, the EAT commented that consultation would usually take place at an early stage in respect of any proposed selection criteria and scoring methods. However, the EAT did not believe that the distinction that has developed among employers between collective and individual consultation recognised good modern industrial practices. The EAT was particularly influenced by the lay members in concluding that ‘general workforce consultation’ on decisions of redundancy selection processes should take place at a ‘formative’ stage. Such consultation could take many forms (such as a townhall meeting) but required the workforce to be able to input on the proposals and alternatives to redundancy.

The EAT concluded that there was a clear absence in this case of consultation at the formative stage and there was nothing from the ET judgment which indicated that there were not good reasons to consult at a workforce level. That was enough to make the dismissal procedurally unfair.

Subjective selection criteria

The EAT observed that ‘good industrial relations’ will vary significantly from country to country, and it is especially important to consult on matters at a workforce level where there is an international influence. In this case ‘entirely subjective criteria’ from the USA had been used, but ‘use of a system which reflects good industrial relations in another nation may not reflect the usual practice in the UK’. The EAT held that ‘if it is considered to be reasonable for the employer to use American selection criteria solely because the organisation is a global one, this would not reflect a recognition of good industrial relations in the UK’.

Appeal

Finally, the EAT noted that an appeal can correct missing parts of individual consultation process (such as providing the claimant with his own scores) but it could not remedy the lack of consultation at a formative stage.

What does this mean for employers in practice?

This case builds on last year’s EAT decision in Mogane and emphasises the importance of early consultation in any redundancy exercise. There are a number of points for employers to consider in light of this case:

• The EAT’s comments about ‘general workforce consultation’ where redundancies are proposed, even where the collective dismissal threshold is not met and there is no existing recognised trade union or employee representative body, will cause some head scratching. The EAT was not prescriptive about what would amount to ‘workforce consultation’. In circumstances where the collective redundancy threshold is met employers are required by statute to consult with anyone ‘affected’ by the proposals, which is (at least in principle) a wider group than those who may be made redundant. The EAT now suggests that, even in redundancy processes where this threshold has not been met, consultation should take place with a wider group of employees than simply those who have been or would be selected after scoring.

What exactly this consultation should involve is unclear and employers will need to consider the mechanism by which any wider workforce consultation would be carried out. This may be more straightforward for those with existing recognised unions or employee representative bodies, but other organisations will need to consider other means of getting across the appropriate message. This might for example include townhall meetings, at least with affected areas of the business, or smaller group or individual meetings. Such consultation should focus on seeking early input on the selection process, as well as alternatives to redundancy, before any scoring is carried out.

• What if you don’t do this? The consequence of this decision is that employers will need to reevaluate their approach to consultation in small scale redundancy exercises (where there are fewer than 20 redundancies proposed). Many employers are reluctant to communicate about proposed redundancies more widely than to those who are, or are likely to be, directly impacted, not least due to concerns about causing anxiety among a wider group of staff than is strictly necessary. Such an approach is now less obviously sustainable. However, employers can take some comfort from the fact that in assessing compensatory awards for unfair dismissal Tribunals would still need to consider Polkey arguments and decide whether, even if a fuller process had been followed, the outcome would have been the same; if it would, any award to the employee would be modest.
  
  
• The practice many employers adopt of carrying out a selection and scoring exercise as part of the preparatory stage and then starting consultation with only those employees who have been provisionally selected has always entailed some risk - it is, for example, contrary to ACAS guidance on handling redundancies which advocates for wider notification and consultation before any scoring and selection has taken place. This case is likely to shift the dial further towards Tribunals asking themselves why the employer did not (or could not) start the consultation process earlier in such scenarios. Given the EAT’s view that the distinction between collective and individual redundancy does not reflect good practice, the risk may be greater when the number of proposed redundancies falls just short of 20 (which would trigger collective consultation).
  
  
• Other key points from this case are essentially a reminder of existing good practice. The fact that a method has been effective across an international group does not make it a reasonable way of conducting redundancies in the UK: selection criteria should always be fair and objective. This case is also a reminder that, whilst an employer will not need to share the scores of others in the pool, how an employee has scored and the threshold mark for redundancy selection should be discussed in consultation meetings.

De Bank Haycocks v ADP RPO UK LTD – judgment available here.