The claimant was an HR manager who was supported by a single member of staff. She suffered a heart attack and was off work for a while, during which time her support staff took on many of the claimant's duties. The claimant returned part-time after several months but the economic situation meant that redundancies were required and the claimant was informed that she was at risk though her support assistant was not placed at risk. The claimant queried this at a meeting with the redundancy panel and put forward a proposal where she might take on both roles and reduce hours to a four day week. This was rejected by the panel and the claimant was made redundant.

The ET found that the respondents had not acted reasonably in determining that it was only the post of HR Manager that was redundant as in reality the number of HR posts was being reduced from two to one. The EAT found that the evidence suggested that the respondents had considered the issue of pooling but that the consultation required more and there was no evidence that the issue had been debated by the panel. On the issue of whether the pool should have included both members of the HR team, HHJ Ansell states

"It seems to us that the mere fact that the Respondent had previously carried out the more junior functions and/or the junior employee "acted up" during sick leave of the Respondent would not by themselves be sufficient factors to determine that the pool should inevitably be two persons"

Further the tribunal, in arriving at their conclusion, had not considered the relevant factors such as those suggested in Leventhal so the case was sent back to them for reconsideration.

__________________________

Appeal No. UKEAT/0198/10/DM

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 28 September 2010

Judgment handed down on 22 October 2010

Before

HIS HONOUR JUDGE ANSELL

MRS M V McARTHUR FCIPD

MR H SINGH

FULCRUM PHARMA (EUROPE) LTD (APPELLANT)

(1) MRS S BONASSERA; (2) HR ADVANTAGE LTD (RESPONDENTS)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR STEPHEN FINN (Consultant)

For the First Respondent
MR DOUGLAS LEACH (of Counsel)

Instructed by:
Messrs Lyons Davidson Solicitors
Victoria House
51 Victoria Street
Bristol
BS1 6AD

For the Second Respondent
MR STEPHEN FINN (Consultant)

UNFAIR DISMISSAL – Reasonableness of dismissal

Tribunal correct in finding that the employers failed to consult properly on the size of the pool, but were in error in finding that the pool had to be two.

1. This has been the hearing of an appeal from a Reading Employment Tribunal (Employment Judge Matthews) who following a hearing on 18 January 2010, in a unanimous reserved judgment sent to the parties on 2 February 2010, determined that the Respondent had been unfairly dismissed by the Appellants, in that they had adopted a flawed selection process in relation to redundancy and, in particular, determined that a reasonable employer would have found the pool of employees at risk as being two, namely the Respondent and Mrs Carter, rather than one, as the Appellants had.

1. The Appellants complain about this decision, contending that it was reasonable for them to find that the pool was one, and contend that in determining that there should be pool of two, the Tribunal substituted their own view for that of the employer's, rather than adopting the range of reasonable responses test.

1. The background facts taken from the Tribunal's decision are that the Respondent joined a company called Unicus Regulatory Services Ltd (Unicus) on 23 January 2006 as Human Resources Executive/Office Manager, being responsible for all human resources matters and managing a team of five/six administrative staff. By the end of 2006, because of rapid business growth, the Respondent gave up the supervision of administrative staff, becoming the Human Resources Manager, without reporting staff.

1. In March 2007, the Appellants acquired Unicus, the Respondent becoming responsible for all aspects of human resources. She also had access to an independent consultant, HR Advantage Limited, who provided human resource advice and assistance. By October 2007, the Appellants' directors determined that HR's services would only be required to support major projects and their monthly retainer was ended in January 2008.

1. Around April 2008, Dr Armstrong became the Chief Executive Officer and the Respondent reported to Dr Birch. A letter from Dr Armstrong dated 21 August 2008 confirmed the Respondent's job title as Human Resources Manager, Fulcrum Pharma (Europe). By this time, Mrs Carter had joined the human resources function as a Human Resources Executive in a support role for the Respondent.

1. On 11 November 2008, the Respondent was admitted to A&E with a suspected heart attack and in due course she required heart surgery. This meant an absence from work until 9 February 2009. During this time, it appeared that Mrs Carter took on some of the Respondent's work and at a meeting on 10 February 2009, Dr Birch mentioned to the Respondent that he thought she would find it difficult to get Mrs Carter back, "To where she was prior to Mrs Bonassera's absence".

1. The Respondent returned to work on a three-day week basis and the Tribunal noted that generally on her return, she found Mrs Carter unsettled and on occasions, emotional and argumentative. The Appellants were suffering from the effects of the financial situation and four redundancies were required.

1. On 18 March 2009, the Respondent sent Dr Birch an email inquiring why he had planned a meeting with Mr Richie of HR. A few days later, he told her that the meeting was to discuss strategic issues, but the Respondent says that her unease as to the future was turning to suspicion. At a meeting on 17 April, Dr Armstrong advised the Respondent that her role as Human Resources Manager (Europe) was at risk of redundancy and she was handed a letter confirming the position, explaining that 12 redundancies were anticipated. Alternative employment opportunities would be considered, but none were suitable for the Respondent. A further meeting was timetabled for 27 April. Dr Armstrong mentioned that Mr Ritchie of HR would be handling the proposed redundancies with Mrs Carter providing administrative support.

1. On 18 April, the Respondent sent Dr Armstrong an email which contained a clear message that, in her view, both she and Mrs Carter should have been placed at risk of redundancy. On 20 April, Dr Birch told Mrs Carter that she was not at risk of redundancy. Mrs Carter was not formally told that the Respondent was at risk until immediately after she was made redundant.

1. Dr Armstrong and Dr Birch prepared notes for the meeting of 27 April, details of which are set out in paragraph 21 of the Tribunal's decision as follows:

"21. Notes were prepared for use by Dr Armstrong and Dr Birch at the meeting on 27 April. We note, in particular, two of the questions and suggested answers prepared for by the note.

'Q: Why haven't you put Caroline [Mrs Carter] and I in a common pool?

We didn't do this because our intention is to continue to operate with an HR Executive position as presently undertaken by Caroline. This position is therefore not directly affected. Our proposal relates to your role as HR Manager EU and it is therefore appropriate to start our discussions on this basis.

Q: Will you change your mind about not creating a pool with Caroline?

The purpose of consultation is to give us a chance to explore points of view concerning our proposals and alternatives to redundancy – I will certainly consider anything you have to say that would support establishing a pool including the HR Executive position. What are your thoughts?

Let's just explore this HR Exec role and pooling. On the assumption that we continue with one job in HR and it is clearly lower level and lower salary than your present role, is this something you might accept as an alternative to redundancy?

Yes: Ok. Your suggestion then is that we should consider "bumping" – potentially making Caroline redundant and you moving to her role?'

This is then followed by advice on what "bumping" involves. It appears that the conversation this note prepared for did not take place. Mrs Bonassera was suggesting something different; that was Mrs Carter's job being subsumed within Mrs Bonassera's job. Equally, the thought of a common pool was not ventured from Fulcrum's side."

1. At the meeting, the Respondent put forward a counter-proposal, suggesting that it should be Mrs Carter to be made redundant, pointing out that she had done both jobs and compared her extensive experience with the more limited experience of Mrs Carter. Although the Respondent did not offer any reduction in her salary, she did indicate that she might be prepared to consider a four-day week basis, either on a permanent or temporary basis at a pro rata salary. She was told her that her counter-proposal would be considered by a panel formed for the purpose of considering any counter-proposals.

1. On 28 April, Dr Armstrong invited the Respondent to a further meeting on 30 April, at which time she was told that her counter-proposal had been debated by the panel, which had also considered other options, such as part-time hours for both her and Mrs Carter and a new job for which neither of them would be suitable. However, the panel had concluded that the right way forward was to make the Respondent redundant. Dr Armstrong indicated that HR would provide advice in relation to the more complex human resources issues.

1. The Tribunal noted that since the Respondent's departure, the Appellants had secured its human resources from a combination of Mrs Carter, more involvement from line management, an online resource and a small amount of occasional advice from HR. The Tribunal noted that Mrs Carter was doing some of the jobs that the Respondent had done previously, but had not assimilated the two jobs, for example, the face-to-face side of recruiting had been passed to line managers. Dr Armstrong indicated that if the Respondent and Mrs Carter's jobs had been pooled and one of them selected to do the job of HR Executive, it would have been by no means certain the Respondent would have been successful simply on the basis of her greater experience in having done the job before. The Tribunal noted in paragraph 26:

"Mrs Carter may have been the better candidate given Fulcrum's objective to simplify its infrastructure and have only a basic human resources function."

1. The Tribunal's conclusion on the issue of unfair dismissal was contained in paragraph 36 of their decision as follows:

"There was consultation on the method of achieving the redundancy. However, in our judgment the selection process was so flawed as to render the dismissal unfair. The first step for an employer in deciding on a selection process is to identify the group of employees from which the person or persons to be made redundant will be selected. This group is the "pool" for selection and it is to that pool that the employer applies the selection criteria. Employers have a good deal of flexibility in this respect and need only show that they have applied their minds to the issue and acted for genuine reasons. However, we must be satisfied that Fulcrum has acted reasonably in this respect. What happened here is that Fulcrum determined that the post to go would be that of Human Resources Manager Fulcrum Pharma Europe. There were no other holders of such a post and Fulcrum therefore determined that the pool was one. In our judgment Fulcrum did not act reasonably in this respect. The reality was that the human resources function was being reduced from two to one. Whilst the two existing human resources jobs were different, Mrs Bonassera's job was the job at risk. This left one job, that of Human Resources Executive. From the evidence we have heard there were no aspects of that job that Mrs Bonassera had not previously carried out and a reasonable employer would have determined the pool of employees at risk as being two, Mrs Bonassera and Mrs Carter. From that pool a reasonable employer would have selected one person for the role of Human Resources Executive. We are conscious that it is not the Tribunal's job to substitute its own view in this respect for that of reasonable management. However, in our judgment this is a case where Fulcrum's determination of the pool is so far from that which a reasonable management would have made that it cannot be said to pass the tests we have set out above. Intriguingly, the notes used to prepare for the meeting on 27 April envisaged a selection pool of two but this was not pursued. It seems this was not pursued because Mrs Bonassera did not raise the exact subject. That does not, however, remove the onus on Fulcrum to act reasonably in this respect and establish a reasonable selection pool from the outset."

1. Further, the Tribunal in paragraph 38 noted as follows:

"What time prevented us from doing, however, was hearing from Mrs Bonassera as to whether or not she would have taken that job, had it been offered. Not only have we not heard that evidence but Fulcrum has not had an opportunity to question Mrs Bonassera about it."

1. On behalf of the Appellants, their representative, Mr Finn, took us firstly to the definition of redundancy in section 139 of the Employment Rights Act 1996:

"139(1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly 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 so 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."

1. He argued in paragraph 4 the Tribunal, in finding that the reality was the human resources function was being reduced from two to one, had failed to ask themselves the proper question. Having reached the conclusion that the human resource function needed to be reduced, the Tribunal, he submitted, needed to ask themselves the next question, namely, which requirement for employees to carry out work of a particular kind has diminished?

1. It was the Appellants' case that there was a diminished requirement on the part of the Appellant for the work done by the Human Resources Manager in what was to become a department of one, and therefore, by looking at the function rather than the work of a particular kind, the Tribunal had reached a conclusion about the appropriate pool, which he submitted was wrong because it was based on a misapplication of the law. Indeed, the Tribunal at times appeared to have accepted that difference, when in paragraph 36 they determined that:

"Whilst the two existing jobs were different, Mrs Bonassera's job was the job at risk."

1. Further, later in that paragraph, they referred to the remaining role as being the Human Resources Executive; therefore Mr Finn submitted that the corollary was that the work of a particular kind, the need for which had diminished, was therefore the HR Manager.

1. For the Respondent, Mr Leach, supporting the Tribunal's approach, argued that the Appellants' approach to the pool was flawed, far too simplistic. He argued that the Tribunal's approach had been to decide that the Respondent's position was to go and therefore the alleged pool of one flowed automatically from that decision, there was no active consideration of pooling at all and that this was therefore outside the range of reasonable responses.

1. In Taymech Limited v Ryan [1994] UKEAT/663/94, Mummery J, President, said this:

"In other words, the Tribunal concluded, a decision had already been made to dispense with that post, and a further conclusion, which appears to have been reached, was that ipso facto the person to go must be the occupant of that post.

…..

The question of how the pool should be defined is primarily a matter for the employer to determine. It would be difficult for the employee to challenge it where the employer has genuinely applied his mind to the problem.

This is a case where the Tribunal concluded that the employers had not even applied their mind to the question of a pool, consisting of people doing similar administrative jobs. As the employers had never applied their mind to anything, except Mrs Ryan's actual job of telephonist/receptionist, they had not applied their mind to a pool and therefore there was no meaningful consultation as to who was in the pool, with whom comparisons should be made with Mrs Ryan's position, and as to who should be selected.

In a sentence, there was no process of selection from a pool. Mrs Ryan was told she was redundant because she was the only person who occupied the position as telephonist/receptionist. The evidence accepted by the Tribunal was to the effect that she was doing more than that job and was in a position where there could be a meaningful comparison between her skill and those of four or five other administrative workers in the office."

1. Harvey at paragraph 1685 sets out the position thus:

"The pool should include all those employees carrying out work of that particular kind, but may be widened to include other employees such as those whose jobs are similar to or interchangeable with those employees."

1. The unusual feature of this case is that Dr Armstrong and Dr Birch had prepared notes which clearly raised the issue of pooling, but these matters were never discussed with the Respondent. In argument before us, Mr Finn suggested that the compilation of those notes satisfied the requirement on the Appellants to consider the issue, but it seems to us that more was clearly required in terms of consultation. It seems to us that the questions on the sheet were the matters that should properly have been raised with the Respondent. Although she was concentrating on her counter-proposal, apart from the fact that her counter-proposal clearly indicated that she was able to take on the whole of Mrs Carter's role, nevertheless the Appellants clearly had the issue of the size of the pool in mind or had received advice about the issue, but for some reason failed to raise it at the meeting, and indeed, there is no evidence that the issue was subsequently debated by the panel.

1. In our view, the Tribunal were correct in finding that the Appellants were in error in automatically determining because the manager's role had to go, the pool was therefore one without any further or meaningful consultation as to the size of the pool.

1. The Tribunal went on to remind themselves that it was not their job to substitute its own view in place of reasonable management, but determined that any reasonable employer would have found that the pool of employees at risk should be two, namely the Respondent and Mrs Carter. Mr Finn argued that attempting to construct a pool on the normal horizontal basis, i.e. looking for other employees carrying out work of that particular kind, or indeed similar to or interchangeable with the employees at risk, would not have brought Mrs Carter into the pool. He argued that the Tribunal made no findings in relation to the similarity or interchangeability of the roles of the HR Manager and HR Executive. No other employees were identified undertaking work of a similar nature or whose work was interchangeable with the Respondent. Mr Finn went on to suggest that the pool appeared to have been constructed on a vertical basis, i.e. the Tribunal looking to see whether more junior employees could be included in the pool on the basis that the Respondent had the capability of carrying out that more junior role. He submitted that such an approach would lead to what he described as "a cascade of uncertainty and disruption" with the threat of redundancy moving down the levels of employee, simply on the basis that the more senior employee had at some stage been capable of carrying out the more junior role. As he submitted, the more senior highly-skilled and capable the employees concerned are, then the bigger the cascade.

1. The concept of including an immediate junior employee into a pool was considered by this Court in Dial-a-Phone v Butt UKEAT/0286/03/TM. In that case, the company had decided to eliminate Mrs Butt's post as Head of Customer Services because it could no longer afford to have a management position in the customer services department, costing the company £73,500 per year. The post's strategic responsibilities could be assumed by Mr Brown, the Managing Director, and the post's day-to-day responsibilities could be transferred to Mrs Butt's deputy, Mr Kemp. Mrs Butt raised the possibility of the company eliminating Mr Kemp's post instead, but the company concluded that that was not a feasible alternative as greater savings could be achieved by the elimination of her post.

1. The EAT approved the Tribunal's analysis, which stated that because the company had decided that Mrs Butt's post should go did not mean that it was she who had to be made redundant, since it may have been appropriate for her to be considered for one of the posts in the company for which there was not then a vacancy, for example, Mr Kemp's, and for the occupant of that post to be made redundant instead.

1. In his conclusions, Keith J first of all referred to the decision in Barratt Construction Limited v Dalrymple [1984] IRLR 385, which suggested that it was up to the more senior employee being made redundant to suggest to an employer that he might be prepared to accept a subordinate position. At paragraphs 19 and 20, Keith J said this:

"19. In our view, it was open to the tribunal to conclude that the Company should have considered offering Mr Kemp's post to Mrs Butt and making Mr Kemp redundant instead, even if Mrs Butt had not suggested that herself. We have not overlooked Mr Jones' reliance on the comment in Dalrymple, but we make three points about it. First, the Employment Appeal Tribunal said that it was not laying down a hard and fast rule. Secondly, even if a senior employee should inform his employers (if it be the case) that he is prepared to accept a subordinate post, that does not necessarily mean that the employers will act fairly in not considering the employee for that post simply because the employee for that post simply because the employee did not say that he would be willing to accept it. Thirdly, Mrs Butt was pressing for Mr Kemp's post to be eliminated instead of hers. It would have completely undermined that stance if she had in effect been required to say (before the Company had reached a final decision on whether Mr Kemp's post should go instead of hers) that she would be prepared to take on his post. In our judgment, it was entirely open to the tribunal to find, to use the language of para. 6(j) of its reasons, that Mrs Butt's selection for redundancy was not carried out after a proper and fair consideration of "the pool of employees", i.e. Mr Kemp and her, from whom the selection should have been made following a fair selection process. A fair consideration of which of them had to go once the decision had been made to eliminate her post would have involved considering which of them should be retained to carry out the duties of Mr Kemp's post. The need to consider that was not dependent on Mrs Butt saying that she would be prepared to take his post on.

20. Nor have we overlooked two criticisms made by the Company of what the tribunal said in para. 6(g) of its reasons as to why the Company ought to have considered offering Mrs Butt the post occupied by Mr Kemp, namely (a) that Mr Kemp "could not perform [Mrs Butt's] strategic roles", and (b) that Mrs Butt "might have been willing to accept a salary cut as an alternative to redundancy". The former was said to be irrelevant, because Mr Kemp's inability to do Mrs Butt's job had nothing to do with her willingness or suitability to do his job. The second was said to be speculative, because there was nothing to suggest that she might have been prepared to take on a less remunerative post in order to avoid her redundancy. We cannot go along with these criticisms. First, the tribunal referred to Mr Kemp's inability to perform Mrs Butt's strategic roles only to contrast the fact that Mrs Butt was able to "perform all the tasks within the role held by Mr Kemp". Mr Kemp's inability to perform her strategic role was not one of the reasons why the tribunal concluded that Mrs Butt should have been considered for his post. Secondly, the tribunal was not indulging in speculation about what Mrs Butt would be prepared to do. The tribunal merely said that she might be willing to accept a salary cut as an alternative to redundancy. Whether she would in fact have been willing to accept a salary cut would have been relevant at the stage when the tribunal would have had to decide whether she had suffered a loss at all by virtue of the Company's failure to consider her for Mr Kemp's post. The real vice was not the tribunal's recognition of the untested possibility that she might be prepared to accept a salary cut as an alternative to redundancy, but the Company's assumption that since she had not mentioned that possibility, it could be ignored altogether."

1. Is there any guidance as to factors that an employer should consider when determining whether subordinate employees should be brought into a pool? In Lionel Leventhal Limited v North UKEAT/0265/04, Bean J said this at paragraph 12:

"12. Whether it is unfair or not to dismiss for redundancy without considering alternative and subordinate employment is a matter of fact for the Tribunal. It depends as we see it on factors such as (1) whether or not there is a vacancy (2) how different the two jobs are (3) the difference in remuneration between them (4) the relative length of service of the two employees (5) the qualifications of the employee in danger of redundancy; and no doubt there are other factors which may apply in a particular case. Here the Tribunal concluded that the Applicant was not given the opportunity to say whether he would have accepted Mr Palmer's position. Mr Palmer was not approached to see whether he was interested in voluntary redundancy. The Tribunal found that this was unfair and it seems to us that it is a finding with which this Appeal Tribunal cannot interfere. There is no rule of law which leads us to the conclusion that this finding of the Employment Tribunal was wrong in law. Paragraph 50 can be fairly be said to be somewhat compressed reasoning but nevertheless we find it a sufficient basis to uphold the finding that the dismissal, albeit for redundancy, was unfair."

1. We agree with that approach and would only add that a starting off point may be to determine within the consultation process whether the more senior employee would be prepared to consider the more junior role at the reduced salary.

1. What factors did this Tribunal take into account in determining that the pool had to be two? The only finding that we can discern from paragraph 36 is the fact that:

"There were no aspects of that job that Mrs Bonassera had not previously carried out."

1. Mr Leach also pointed to a finding in paragraph 11 that Mrs Carter had clearly had extra responsibilities during the Respondent's absence on sick leave. Mr Leach also, in his submissions before us, seemed to be suggesting that the new role may have had some of the functions carried out by both employees. Whilst the Tribunal in paragraph 25 recorded that Mrs Carter was now doing some of the jobs that the Respondent had done previously, they made it clear that the new role was still at a far more basic level than the former HR Manager's role.

1. It seems to us that the mere fact that the Respondent had previously carried out the more junior functions and/or the junior employee "acted up" during sick leave of the Respondent would not by themselves be sufficient factors to determine that the pool should inevitably be two persons. The Tribunal adopted an approach that in reality it was the human resources function that was being reduced from two to one, but then went on to say that it was the Respondent's job that was at risk. The Tribunal concluded that the employer's determination of the pool cannot have been said to, "Pass the tests that we have set out above". However, it is not clear to us what those tests were. Unfortunately, the Tribunal do not appear to have been referred to any of the authorities on the topic, but it does seem to us that the Tribunal came to a conclusion that the pool had to be two without considering relevant factors such as those suggested in the Leventhal case.

1. Accordingly, we cannot agree with the Tribunal on this aspect of their decision and it seems to us the best course would be to invite them to reconsider this aspect, with hopefully the benefit of more detailed submissions when they come to consider the remedies issue. Clearly, however, the finding of unfair dismissal must stand, based on the Appellants' failure to properly consult with the Respondent and to properly consider the possibility of a pool of two.