In a turbulent economic world, organisational changes are inevitable.  Proper handling of redundancies is crucial if employers are not to fall foul of the law.

It is well established that a dismissal is likely to be unfair if the employer gave no consideration at all to whether suitable alternative employment existed within its organisation (Vokes Limited v Bear [1973] IRLR 363). The subsequent case of Quinton Hazell Ltd v WC Earl [1976] IRLR 296 made clear  a duty  on employers to make reasonable efforts to look for alternative employment, although there is no requirement to make every possible effort, or even to look energetically,  nor to create a new post.

Sometimes, employees under threat of redundancy must apply for positions in a reorganised structure.

In [Morgan v The Welsh Rugby Union]() UKEAT/0314/10 the EAT upheld a Tribunal’s decision that, in carrying out a competitive exercise in a re-organised structure, an employer was legitimately able to use subjective, as well as objective, criteria for selection to the alternative post.

Mr Morgan was made redundant following a re-organisation. He applied for a new post with a wider remit than the similarly-named post he had held.   It was a senior role, requiring qualification “to at least WRU Level 4 or equivalent” and “an established reputation of developing elite coaches and within the field of coach education”. The candidates were asked to prepare a 10-15 minute presentation on rugby coaching.

The selection committee did not adhere to the job description or format for the interview.  The person appointed was not qualified to WRU Level 4.  Mr Morgan had substantial recent experience of training elite coaches; the successful applicant had never done so, although had been assistant coach of the national team.  Mr Morgan’s presentation lasted 10-15 minutes; the person appointed gave one of much greater length, with a plan and vision for the post as opposed to answering the precise question asked.  The committee gave overall scores, but did not produce individual scores for the presentation or individual questions.

The committee unanimously considered that a candidate other than Mr Morgan was best.  An Employment Tribunal decided the interview process was “objective” and Mr Morgan had not been unfairly dismissed.

On appeal, Mr Morgan contended:

(i) the Tribunal had failed to have regard to and apply the third and fourth principles established in Williams v Compair Maxam [1982] IRLR 83 (i.e. that an employer making a selection for redundancy should seek to establish criteria which can be objectively assessed and selection should be fairly made in accordance with those criteria). 

(ii) the Tribunal did not apply guidance given in Ralph Martindale & Co v Harris UKEAT/0166/07 requiring an employer selecting between redundant employees for a new role to operate a system which is (1) objective and (2) avoids the possibility of a decision which might be seen as capricious or arising out of favouritism on personal grounds.

First, the EAT referred to another part of the judgment in Williams, where the Appeal Tribunal had said:

“…these are not immutable principles which will stay unaltered for ever.  Practices and attitudes in industry change with time and new norms of acceptable industrial relations behaviour will emerge.  Secondly the factors we have started are not principles of law, but standards of behaviour.”

The EAT expressed the view that where an employer has to decide which employees from a pool are to be made redundant, the criteria will reflect a known job, performed by known employees over a period.  Where, however, an employer has to appoint to new roles after a re-organisation, the decision must be forward-looking,   likely to centre upon an assessment of the individual’s ability to perform in the new role.  These considerations may well apply with particular force where the new role is at a high level and involves promotion.

At the end of the day, Tribunals must apply section 98(4) of the Employment Rights Act 1996 .  A Tribunal is entitled to consider how far an interview process was objective, but should keep in mind that an employer’s assessment of who will best perform in a new role is likely to involve a substantial element of judgment.  A Tribunal is entitled to consider whether an appointment was made capriciously, out of favouritism or on personal grounds.  If it concludes it was, it is entitled to reflect that in its finding under section 98(4).
When making an internal appointment, there was no rule requiring adherence to a job description or person specification.  Therefore, the Welsh Rugby Union was entitled to appoint a candidate it considered able to fulfil the role.

Another alternative employment issue arose in [Simpson v Endsleigh Insurance Services Ltd and others]() UKEAT/0544/09. Under Regulation 10 of the Maternity and Parental Leave etc Regulations 1999, an employee whose job becomes redundant during maternity leave is entitled to be offered any suitable available vacancy that exists before her old contract ends. Specifically:

* the work to be done must be both suitable in relation to the employee and appropriate for her to do in the circumstances (Regulation 10(2)(a)); and * the provisions as to the capacity and place in which she is to be employed, and the other terms and conditions must not be substantially less favourable than those of her previous contract (Regulation 10(3)(b)).

A dismissal in breach of Regulation 10 is automatically unfair.

Ms Simpson worked as an insurance consultant in London.  Whilst on maternity leave her employer closed down most of their retail outlets, relocating to call centres in Cheltenham, Burnley and Northern Ireland. Ms Simpson claimed she should have been offered alternative employment in Cheltenham.

The employer’s HR Manager gave evidence before the Tribunal that none of the roles sent to the Appellant were considered to be suitable.  There were only two in London she could have applied for which would not have required her to relocate, but these were not considered to be suitable for her.

The Tribunal dismissed her unfair dismissal claim, finding she would not have relocated to Cheltenham. Further, the vacancies were either not suitable or appropriate because of the required relocation. The place in which she was to be employed was substantially less favourable to her than if her employment under her previous contract had continued. Therefore none of the jobs were suitable alternatives and Endsleigh had not been obliged to offer them.

The EAT ruled that a new contract of employment must comply with Regulation 10(3).  The Regulation protects those on maternity leave in preference to those still working and the necessity to provide an equivalent post is protected by the requirement that terms were not less substantially favourable.

As to whether suitability is an objective or subjective test, the EAT’s view was the Tribunal was correct to focus on an objective decision made by the employer. Under the Regulations there is no requirement on the employee to engage in considering the suitability of alternative jobs, although the employer would have to consider what it knew about the employee’s personal circumstances and work experience.  Eventually it is up to the employer, knowing what it does about the employee, to decide whether a vacancy is suitable.

The case of [Fulcrum Pharma (Europe) Ltd v Bonassera and Anor ]()UKEAT/0198/10 emphasises that where an employer decides to remove a particular position, it is wrong  automatically to include only the employee occupying that position in the pool. It may be appropriate to include more junior employees. Whilst employers have some discretion, proper consideration needs to be given to the issue.

An HR team consisted of a manager supported by an executive. The employer decided it had a diminished need for a manager and made the manager redundant after a consultation process, but without including the executive in the pool. The Employment Tribunal held that a reasonable employer would have included both, taking into account any circumstances in which each had carried out the other’s role.

The EAT agreed the employer had failed to properly consider a possible pool of two and considered the onus was on the employer to raise the issue in the consultation process, adding

“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”.

Therefore, the Tribunal’s finding of an unfair dismissal stood.

However, the EAT did not agree with all the Tribunal’s reasoning. The fact that each could potentially do the other’s job was not, in itself, sufficient to determine the pool should include both. The Tribunal should have taken into account relevant factors such as those applied in Lionel Leventhal Ltd v North UKEAT/0265/04, including:

* whether or not there is a vacancy * how different the two jobs are * the difference in remuneration between them * the relative length of service of the two employees * the qualifications of the employee in danger of redundancy

In [Pinewood Repro Ltd T/A County Print v Page]() UKEAT 0028/10 the Employment Tribunal found that an employee, included in a pool of three, had not been provided with proper explanation as to why he was marked down in a scoring exercise. Consequently, the Tribunal found the dismissal was both procedurally and substantively unfair.

On appeal, the employer argued the Tribunal had appeared to set out an incorrect general principle, namely

“It is necessary for an employer to provide an explanation of why an individual has received the scores he has”.

It was contended that effectively the Tribunal had entered “into the factual arena concerning the marking of these candidates”.

The EAT disagreed and accepted the analysis given on behalf of the employee, namely this was an issue as to whether the consultation process was reasonable and sufficient. The evidence favoured there was a lack of information provided. It was for the Tribunal to decide whether an employee has been given a fair and proper opportunity to understand fully the matters on which consulted and to express views on them. This may well include being given sufficient information to be able to challenge the scores given. It was then for the employer to consider those views properly and genuinely in reaching its decision.

In De Belin v Eversheds Legal Services Ltd ET/1804069/09 Eversheds inflated the score of a female associate in a redundancy scoring exercise, taking into account the fact she was on maternity leave. The result was she was given a maximum notional score, not representing past performance, and beat her male colleague (the only other person in the pool) by 0.5 of a point. The Employment Tribunal found this was discrimination against the male colleague on the ground of sex, contrary to the provisions of the Sex Discrimination Act 1975 (the equivalent provision of which are now under the Equality Act 2010).

Section 1 (1)(a) of the Sex Discrimination Act 1975 provided that

“a person discriminates against a woman if …..on the ground of her sex he treats her less favourably than he treats or would treat a man”.

Under Section 2(1) the same principle applied equally to a man, but is qualified by section 2 (2):

“no account shall be taken of a special treatment afforded to women in connection with pregnancy or childbirth”.

Eversheds’ position was that section 2 (2) provided a blanket special treatment for pregnant women. The Tribunal did not agree - there had to be circumstances (of which this was one) where treatment of women in connection with pregnancy or childbirth could not provide employers with the protection of section 2(2).

Eversheds has appealed and this was heard by the EAT in December 2010. Judgment is awaited.

Finally, tribunal compensation limits increased on 1 February 2011.  The maximum compensatory award for unfair dismissal increased to £68,400 and the maximum amount of a week’s pay (used in calculating a basic award and a statutory redundancy payment) rose to £400.