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Work Matters: Redundancy - consultation, selection criteria and a pool of one

In Mogane v Bradford Teaching Hospitals NHS Foundation Trust, the EAT held that the employer’s arbitrary use of a single selection criterion had led to only one candidate being selected. It decided that consultation should have started at an earlier point and included consultation over the selection criteria itself. Here there was no “genuine and meaningful” consultation because the employee had not been afforded an opportunity to challenge the criteria that ultimately led to him being dismissed.

The law

Section 139 of the Employment Rights Act 1996 states that an employee’s dismissal will be by reason of redundancy if the dismissal is because (or mainly because) the employer intends to:

  • close its business entirely;
  • close the site where the employee works; or
  • reduce its headcount because its need for employees to carry out a particular kind of work has ceased or diminished.

However, to avoid claims for unfair dismissal from any employees with over two years’ service, the employer also needs to follow a fair procedure.

The key elements of a fair procedure are:

  • Warn: the employer should give as much warning as possible of impending redundancies to the employees who may be affected.
  • Consult: this should be genuine and meaningful and take place when the employee (or their representatives) may still affect the outcome.
  • Fair selection:
    • Identify an appropriate pool of employees from whom to select for redundancy - this is primarily the employer’s decision, but it must be within the range of reasonable responses. 
    • Choose reasonable selection criteria to apply to those employees in the pool.
  • Consider alternative employment.

Facts

Mrs Mogane was one of two Band 6 nurses employed by Bradford Teaching Hospital NHS Foundation Trust on a series of fixed-term contracts. The employer was facing financial difficulties and needed to make a reduction in staff. It decided to do so by reducing the number of Band 6 nurses.

The employer met with Mrs Mogane to tell her the financial difficulties the Trust was facing. However, it did not consult with her further about its impact. Shortly after this meeting, the employer decided Mrs Mogane would be selected for redundancy because her fixed term contract was the first to expire. The employer then consulted with her about finding alternative employment. As none was found, Mrs Mogane was dismissed by reason of redundancy.

Mrs Mogane brought an Employment Tribunal (ET) claim for unfair dismissal.

ET decision

The ET dismissed the employee’s claim and found that her dismissal was fair.

She appealed to the Employment Appeal Tribunal (EAT).

EAT decision

The EAT upheld the employee’s appeal and agreed that she had been unfairly dismissed. The employer had not followed a fair procedure because the employee was effectively chosen to be dismissed (by the employer’s approach of choosing employees based on their renewal dates) before any consultation had taken place. The later consultation was not genuine or meaningful as the employee had no potential to influence the outcome.

In other words, where the choice of criteria used by employers has the practical result of selecting one employee for redundancy (i.e. it simultaneously decides the pool of employees and which employee is to be dismissed) consultation should take place before finalising the choice of selection criteria.

The EAT also said that the employer had acted in an arbitrary and unreasonable manner by deciding (without prior consultation) that the sole selection criteria would be the date of the next fixed term contract to expire. This was a breach of the implied term of trust and confidence between the employer and its employee.

Fladgate comment

Employers have previously enjoyed a wide discretion as to how they draw up redundancy selection pools and criteria. This case is confirmation that their discretion is not unfettered. Employment Tribunal’s will be wary of criteria that appear targeted at specific individuals.

This decision also underlines the importance of genuine and meaningful consultation as part of a fair redundancy procedure. In particular, employers should consult over any decisions which are likely to be determinative of the outcome of the redundancy process. For instance, a “last in/first out” policy may be considered arbitrary and unfair, in circumstances where there is no prior consultation with employees regarding its implementation.

To mitigate the risk of a claim, employers should start the consultation exercise with all affected employees at an early stage and include consultation over the particular selection criteria they plan to use. In cases where the size of the selection pool is limited to just one employee (or where it is equal to the number of redundancies being made), there should invariably be consultation regarding the pool itself. Otherwise, the employees may not get the chance to influence the outcome, for example by suggesting alternative selection criteria, before their dismissal is effectively rendered unavoidable.

Finally, this decision is a good reminder that the expiry of a fixed-term contract is a dismissal and that the normal rules relating to unfair dismissal apply to the termination of a fixed-term contract.

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