Getting redundancy right

The decision in De Bank Haycocks v ADP RPO UK Ltd clarifies that redundancy consultation with employees must begin whilst proposals are still at an early or formative stage so that employees can have a real opportunity to influence the final outcome and perhaps avoid dismissals altogether.

If this early-stage consultation doesn’t happen then, even if the redundancy process is ‘textbook’ in all other respects, the resulting dismissals are at risk of being found to be unfair.

In practice, it is not uncommon for redundancy consultation with employees to commence once the business has deemed that the fact of redundancies is inevitable. The consultation then typically focuses on selection, numbers or packages. This Employment Appeal Tribunal (EAT) decision reminds employers of the risks in that approach.

The facts

Mr De Bank Haycocks (DBH) was employed as a recruitment consultant by ADP working in a team of 16 for one single client. In March 2020, the client’s demand for new staff dropped by around 50% due to the pandemic and by the end of May 2020, ADP had decided it needed to reduce the number of employees in the client’s team.

In early June 2020, ADP’s US parent company directed ADP to score the 16-strong team against specific subjective selection criteria. This was executed and DBH came last on the scoring. On 18 June, ADP decided it needed to reduce the team by two employees and on 19 June, ADP set the timetable for the redundancy process. This would commence with an initial consultation meeting with employees on 30 June 2020 to be followed by a consultation period of 14 days and ending with the redundant employees being notified on 14 July 2020.

Accordingly, on 30 June 2020, DBH was called to a meeting and advised that there was a need for redundancies. He was told that he could ask questions and suggest alternatives. He was invited to a further meeting on 8 July 2020 and to a final meeting on 14 July 2020 where he was notified of his redundancy. At no point prior to his dismissal was DBH provided with his selection scores or told how he had scored against his peers.

DBH appealed and, prior to the appeal hearing, he was provided with his selection scores (but not those of his colleagues).  He was unsuccessful at appeal and brought an unfair dismissal claim to the Employment Tribunal.

The Employment Tribunal found DBH’s dismissal to have been fair. It acknowledged that DBH had not been provided with his selection scores before his dismissal but found that this procedural flaw had been rectified at the appeal stage. It could not find fault with the selection pool used and DBH had been unable to show that he should have scored higher than he actually did.

DBH appealed to the EAT arguing that the employment tribunal had failed to consider the issue of consultation adequately.

The EAT decision

The Employment Appeal Tribunal (EAT) upheld DBH’s appeal and substituted a finding of unfair dismissal. It found:

• There had been a clear absence of meaningful consultation at the formative stage of the redundancy process.
• The absence of consultation at a stage when employees could have proposed a different approach to any aspect of the proposed process and therefore could have had the potential to influence the employer’s decision was indicative of an unfair process.
• In this case, whilst the appeal had been carried out conscientiously (and had remedied the procedural failing that DBH had not been provided with his scores prior to dismissal) it could not rectify or repair the fact that there had been no consultation with employees during the formative stage of the redundancy process.

Guiding principles for a fair redundancy consultation

The EAT reviewed previous case law authorities and set out the following guiding principles for a fair redundancy consultation:

• The employer will normally warn and consult either the employees affected or their representative when redundancies are on the horizon.
• A fair consultation occurs when proposals are at a formative stage, and where the employee is given adequate information and adequate time to respond (along with conscientious consideration being given to that response).
• In consultation, the purpose is to avoid dismissal or reduce the impact of redundancies.
• A redundancy process must be viewed as a whole, and an appeal may correct an earlier failing (in this case it corrected the procedural failing on provision of scores but it did not correct the fundamental failing of a lack of consultation at a formative stage).
• It is a question of fact and degree as to whether consultation is adequate and it is not automatically unfair that there is a lack of consultation in a particular respect.
• Any particular aspect of consultation, such as the provision of scoring, is not necessarily essential to a fair process.

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• The use of a scoring system does not make a process fair automatically.
• Whether it is reasonable to show an employee the scores of others in a pool will be case-specific.

Trend in consultation leading to alternative outcomes

The EAT noted that whilst in the past, redundancy consultations tended to focus on methods of selection or redundancy packages, in more recent years consultation has sometimes resulted in a broader range of outcomes such as a workforce agreeing to take a pay cut to avoid redundancies.

With this in mind, the failure to consult with employees at a formative stage prevented other outcomes from even being considered.

Reduction in Trade Union representation

The EAT also noted that there are now many more redundancy situations in circumstances where there is no recognised Trade Union representation.

This matters less in relation to large-scale (collective) redundancies because the Trade Union and Labour Relations (Consolidation) Act 1992 makes provision for the election of employee representatives where there is no recognised trade union.

The Act states that if an employer proposes to make redundancies of 20 or more employees within a period of 90 days or less then it must consult on its proposals with representatives of the affected employees while the employer’s proposals are still at a formative stage.

However, where fewer than 20 employees are affected (and so there is no statutory process to follow) there has perhaps been a tendency for employers to overlook what might be considered the “general workforce” stage of consultation and proceed straight to ‘individual’ consultation.

This decision is a reminder that the need to consult with employees whilst the proposals are at a formative stage is just as important in “individual” redundancy situations involving fewer than 20 employees.

The bottom line is that all employees should have the opportunity to influence the employer’s decision and avoid or reduce the impact of dismissals.

The US parent company’s involvement

The EAT noted that the approach taken to employment law and to good industrial relations varies significantly between different nations. In this case, the scoring tool for selection used entirely subjective criteria and the UK subsidiary were directed to use it by the US parent company.

The EAT pointed out that it would not necessarily be reasonable for a UK employer to simply rely on its international parent’s selection criteria solely because it is part of a global organisation. To do so would overlook good industrial practice in the UK which, when dealing with UK employment law, is paramount.

Had there been workforce-level consultation in this case then it is possible that the differences in selection practice between the US and UK could have been taken into account.

The role of an appeal against dismissal

The EAT’s comments about the role of an appeal against dismissal are helpful. They remind us that a well-conducted appeal can sometimes correct a procedural flaw in the individual consultation process (such as in this case, the failure to provide DBH with his selection scores) but an appeal, however well-conducted, cannot repair a fundamental, systemic failing (in this case the failure to consult with the workforce at the formative stage of the redundancy process).

In conclusion…

This is an important decision that reminds us that the primary aim of redundancy consultation is avoiding dismissals or reducing their impact. This applies to all redundancy processes and not just those caught by the collective consultation rules. Crucially, a “tickbox” individual consultation process carried out after substantive decisions have been made is at risk of challenge.

Some may think this rather idealistic but early consultation has been shown to make a difference.

In November 2015, JCB workers voted to accept shorter working hours for three months to prevent the need for compulsory redundancies, with other jobs saved through voluntary redundancies and early retirements. This happened as a result of the consultation exercise and the Trade Union representative at the time commented, “It’s a magnanimous act which is in the spirit of the approaching festive season and means that over 100 people who were under threat of compulsory redundancy will now have a much happier Christmas.”

One more thing…

Whilst we are on the subject of preparedness in the context of redundancies, this is a good opportunity to remind employers of the legal obligation to notify the Secretary of State of their intention to make 20 or more employees redundant within a period of 90 days or less using form HR1.

Failure to do so is a criminal offence, which can result in an unlimited fine being levied against the employer and individual directors can also be found liable, if the offence has been committed with their consent or connivance or is attributable to their neglect.  A beartrap to avoid!

Getting redundancy right: How we can support you

Want to know more? Contact Lucy Gordon, or our Employment and Immigration team to find out more about how your business can adapt to the changing world of work.