Selection for Redundancy
Selection for Redundancy – avoiding the pitfalls
The redundancies level for the three months to January 2009 was 266,000, up 86,000 over the quarter and up 154,000 over the year. This is the highest figure since comparable records began in 1995. With job losses being reported in the media on a daily basis, and a senior government minister predicting the worst financial crisis for over a century, many employers will be forced to consider making compulsory redundancies. As always, it is essential to comply with existing legislation when implementing redundancies and to avoid potential pitfalls which may otherwise lead to claims for unfair dismissal and unlawful discrimination.
Preamble
A redundancy dismissal will be unfair if either the selection procedure itself or the outcome of applying it fails to satisfy the ‘reasonableness’ test in S.98(4) ERA. This raises several issues, including the identification of an appropriate ‘pool for selection’ and how to ensure that the process of selection is carried out fairly.
The “pool” for selection
In carrying out a redundancy exercise, the first step for an employer is to identify the group of employees from whom those who are to be made redundant will be drawn. This is the ‘pool for selection’, and it is to these employees that the employer will apply the chosen selection criteria. Against the backdrop of a recession, it will often be to an employer’s advantage to draw the pool as widely as possible. This will give the flexibility to select less capable staff across a range of departments or job categories instead of losing valued employees from a more narrowly defined group.
Where there is a customary arrangement or agreed procedure which specifies a particular selection pool, an employer will normally be expected to comply with it unless he can show that it was reasonable to depart from it. Where there is no established procedure in place, however, employers have a good deal of flexibility in defining the pool. It is only necessary to show that they have applied their minds to the problem and acted from genuine motives.
Selection Criteria
Having established the appropriate pool for selection, an employer must devise and apply suitable selection criteria. Those criteria should be objective; not merely reflecting the personal opinion of the selector, but verifiable by reference to data such as records of attendance, efficiency and length of service. If the selection criteria are objective, a tribunal should not subject them to minute scrutiny. Essentially, the tribunal’s task is to satisfy itself that the method of selection was not inherently unfair and that it was applied in the particular case in a reasonable fashion.
Considerations that are particularly relevant in a recession include the need to maintain objectivity in the choice of selection criteria and their application; the tailoring of criteria to meet the challenges of an economic downturn; and the danger that the employer, preoccupied with maintaining the organisation’s financial viability, may fall foul of discrimination law. These are discussed below.
Choice of criteria
Common criteria used by employers when selecting employees for redundancy are performance, skill and knowledge, disciplinary records, attendance records and last in, first out. The last two in particular ,however, may present difficulties from the perspective of discrimination law.
Where there is a pressing need to make redundancies, as is often the case in a recession, one of the dangers is that the employer loses sight of the need to maintain objectivity. For example, the criterion applied in Williams and ors v Compair Maxam Ltd– retention of employees who, in the employer’s opinion, ‘would keep the company viable’ – was ruled to be entirely subjective and unreasonable and the resulting dismissals unfair. Similarly, criteria such as ‘best suited to the needs of the business’ and ‘attitude to work’ have been held to be lacking in objectivity.
Selection criteria should be drawn up with care, bearing in mind the challenges facing the organisation in an economic downturn. A business may, for instance, need to develop into new areas in order to remain profitable, in which case the employer may wish to retain staff with expertise in those areas or the ability to develop it. Written or practical tests may be used with a view to identifying those staff best suited to meet the organisation’s future needs. If certain factors, such as performance or flexibility, are felt to be particularly relevant in the current economic climate, then an employer may consider adopting a matrix system and weighting the number of points awarded to favour those factors. In some cases, the employer may wish to depart from previously agreed selection criteria. The scope for doing so is discussed below.
In a recession it can be tempting to retain cheaper employees and dismiss those on higher salaries, but employers should be cautious about simply adopting this approach. In KGB Micros Ltd v Lewis the selection of salesmen based on a ‘cost savings’ criterion – involving the selection of those who cost most in terms of overheads but who generated least revenue – was not an appropriate yardstick by which to assess employees’ performance. The employer had failed to undertake any real appraisal of the employees and its selection process completely lacked objectivity.
Redundancy programmes are sometimes used as an opportunity to weed out underperforming employees. Performance is a common selection criterion, and an organisation which sets targets for employees and regularly reviews performance should have to hand objective and verifiable documentation on which to rely. However, this is an area in which employers should be particularly careful to retain objectivity. An employer that does not regularly monitor performance, and instead relies on the subjective opinion of the employee’s manager at the time redundancy is considered, will be leaving itself open to the allegation that the criterion is either not objective or is not being applied in a fair manner.
Applying the criteria
Where there is a urgent need to cut jobs, it is all too easy for employers to misapply their selection criteria. The inappropriate application of otherwise fair criteria will make a dismissal unfair. For that reason, the application of the criteria should be supported by detailed records and, ideally, more than one assessor should be involved. Where the pool for selection comprises a number of teams, employers should check the marks awarded to ensure that no individual manager has marked his or her team excessively high or low.
Discriminatory criteria
Where there is a pressing need for redundancies, it is all too easy to allow discriminatory criteria to creep into the selection process. Already there is evidence that the recession is affecting older employees disproportionately. The Labour Market Statistics First Release for February 2009, issued by the Office for National Statistics, shows that unemployment is rising at a faster rate for the over-50s than it is for any other age group. In Court v Dennis Publishing Ltd a tribunal found that a publishing company directly discriminated against a 55-year-old senior employee contrary to the Employment Equality (Age) Regulations 2006 when it selected him for redundancy. A number of factors led the tribunal to draw an inference of discrimination, including a general culture within the company that younger, cheaper employees were preferable to older, more expensive staff, and a failure to consider for redundancy any other employees, who all happened to be at least 20 years younger than the claimant.
There are potential pitfalls in using health and attendance records as a means of selecting employees for redundancy, since doing so might infringe the provisions of the Disability Discrimination Act 1995. Employers need to exercise caution in the use of selection criteria that place disabled employees at a disadvantage, bearing in mind the prohibition on direct discrimination in S.3A(5) DDA
Employers should also be aware of their duty under S.4A(1) DDA to make reasonable adjustments, which arises where a provision, criterion or practice places the disabled person at a substantial disadvantage in comparison with persons who are not disabled. In the context of redundancy selection, the duty may entail modifying assessment procedures or even adjusting the selection criteria to disregard disability-related absences, although much will depend on the circumstances.
Applying for available jobs
A device that may appeal to employers who need to shed staff quickly in the face of a recession is to require employees at risk of redundancy to apply for a limited number of new or existing jobs. On the face of it, this offers the advantage of allowing the employer to sidestep the normal rules on redundancy and unfair dismissal. There is relatively little authority on this point. However, a number of cases suggest that the selection process for new posts is not subject to the same rigorous principles that apply in the context of redundancy selection.
However, the employer must consider the applications properly and in good faith, and might even have a duty of care to the employees, but the process is not akin to redundancy selection.
RECOMMENDED ACTION
Employers faced with making redundancies may find the following checklist useful:
o when identifying the pool for redundancy selection, bear in mind that a broader pool may allow the retention of valued employees across a range of departments or job categories
o consider the possibility of bumping redundancies as a means of retaining skilled and experienced staff
o when drawing up selection criteria maintain objectivity
o if existing selection criteria are no longer appropriate or require modification, seek to negotiate new criteria with the employees or the relevant union
o ensure that the selection process is properly documented and can be supported by reference to objective records, such as personnel files
o be cautious about requiring staff at risk of redundancy to compete for a limited number of new or existing jobs
o when faced with a need to make job cuts, be careful not to allow potentially discriminatory criteria to impair the selection process.
At Premier Legal we have considerable experience of guiding clients through the redundancy process from start to finish to ensure that they do not fall foul of the law. Should you require further information concerning any aspects of redundancy procedure, please do not hesitate to contact us.
