In the recent Employment Court decision of Totara Hills Farm v Davidson, the farm manager, Mr Davidson was made redundant after the employer decided to reduce costs due to worsening economic conditions. The Court held where a decision to make an employee redundant is challenged, the employer cannot simply say there was a genuine business reason for it without the Court examining the merits of this claim. The Court held that the "Court or Authority will need to do so to determine whether the decision, and how it was reached, were what a fair and reasonable employer would/could have done all in the circumstances".
In Totara Hills, the employer provided very little evidence of the substantive justification (of claimed 'cost savings') for Mr Davidson's dismissal. Based on what evidence was available, the Court did its own calculations and concluded that making Mr Davidson redundant would only result in a 6% reduction in expenditure, compared to the 10% the employer had advised staff needed to be saved. Because of this, the Court held that the genuineness, and therefore the justification, of the decision to make Mr Davidson's role redundant was thrown into doubt, and the decision to dismiss was unjustified.
Another important aspect of this case relates to good faith obligations and redeployment. The farm manager role was made redundant and a new smaller role (on less pay) of junior shepherd was created, which the farm manager was told he could 'apply' for. The Court held that the employer's actions were unjustified because the statutory good faith obligations encompass redeployment and the farm manager should have been 'offered' the new junior shepherd's position. The Court stated that a "fair and reasonable employer would, at the least, have offered that alternative [role] to Mr Davidson ... whose skills and experience would have been more than adequate for it".
This case sends the signal that the Authority and Court are likely to enquire more carefully about the merits of business decisions in restructuring situations and assesses whether genuine redeployment options have been explored. Based on this, it will be even more important to provide comprehensive rationale for making organisational changes, and if the decision is challenged, to provide detailed evidence of these reasons to the Authority or Court.