It is hoped that we no longer have to use the term ‘recession’ when referring to the economy, however, it is probably too soon to think that we are completely out of the woods. Many employers are still suffering the effects of the economic downturn and are having to face the unenviable, and often daunting, task of making members of staff redundant.

Aside from being an unenviable task, if employers do not handle a redundancy exercise correctly, they risk having a claim of unfair dismissal being brought against them. Whilst redundancy is a potentially fair reason for dismissal under Guernsey’s employment protection law, in order to minimise the employer’s exposure to a claim, there must be a genuine redundancy situation and the employer’s procedure for handling the redundancy must be fair and reasonable.

So how does an employer decide who to make redundant?

The Commerce and Employment Department has issued a Code of Practice on Handling Redundancy (“the Code”) which sets out a procedure of ‘good practice’ to assist employers in conducting a redundancy exercise. This includes a requirement to establish criteria when selecting employees for redundancy. Any criteria should be objective and capable of being verified. Some common examples of fair selection criteria include performance, length of service, attendance records and disciplinary records but can be more wide-ranging depending on factors which are important to the business. Many businesses then use the criteria in a ‘skills matrix’ to give a score to each employee, the total scores being the determining factor in who will be selected for redundancy.

The criteria adopted must be applied equally to all employees at risk of redundancy. A failure to do so and/or a selection made on subjective grounds may potentially result in an employee bringing a claim of unfair dismissal on the grounds of a procedurally unfair redundancy. In determining such a claim, the Tribunal will consider whether the employer’s actions in the redundancy exercise were within the range of conduct that would be expected of a reasonable employer, taking into account the selection criteria it had adopted and the employer’s assessment of the employees at risk of redundancy against that criteria.

In the recent case of Alan Roussell v Regency Fulfilment Limited (4 May 2011) the Guernsey Employment Tribunal specifically looked at the fairness of selection criteria adopted in a redundancy exercise. Mr Roussell brought a claim of unfair dismissal against his former employer alleging that he had been unfairly dismissed on the grounds of redundancy. He objected to some of the selection criteria adopted in the redundancy exercise, in particular the assessment of IT skills and efficiency. He argued that, because he did not use a computer in his role, he had not learnt the systems and consequently the assessment of his IT skills in determining the outcome of a redundancy selection exercise was unfair.

The Tribunal considered the Company’s redundancy procedure as a whole and found little fault with it. It was determined that the selection criteria used to grade the employees was largely objective, although it was agreed that the assessment of IT skills did isolate Mr Roussel unfairly given that he did not have access to a computer. Importantly, however, the Tribunal found on the facts that Mr Roussell would still, overall, have been selected for redundancy notwithstanding this potentially unfair selection criteria. As such, the Tribunal held that the dismissal was fair as the overall process and actions of the Company were within the range of conduct that a reasonable employer could have adopted.

Morgan v The Welsh Rugby Union (UK EAT/0314/10)

Having determined which employees are at risk of redundancy, the Code also states that consideration must be given to whether alternative work could be offered to any of those employees in order to avoid dismissals.

If a redundancy situation has come about as a result of a company re-organisation, it may be that a new role has been created which an employee potentially at risk of redundancy could fill. In such a situation, should the employer adopt the same rigorous and objective selection criteria in determining which employee should be offered the role and avoid dismissal as applies in the redundancy selection itself?

This question has recently been considered by the Employment Appeal Tribunal (EAT) in the case of Morgan v The Welsh Rugby Union. As a result of a reorganisation, Mr Morgan and Mr Schropfer were both facing redundancy. A new post had been created in the restructure, however, and both employees at risk of redundancy, along with one other, were put forward for the position. In determining who should get the role, a panel conducted interviews with the individuals. Mr Morgan had more relevant experience and was more qualified than Mr Schropfer. However, on the basis of his vision for the job communicated at the interview, Mr Schropfer was given the role over Mr Morgan. As a result, Mr Morgan was made redundant.

Mr Morgan brought a claim of unfair dismissal arguing that the appointment process for the new role was not objective and therefore unfair. The Tribunal dismissed his claim, as did the EAT. It was held that the objective selection criteria that employers must adopt in considering which employees are at risk of redundancy do not extend to the consideration of those employees for an alternative role. The employer is, and should be able, to appoint the person who, in its view, is most suitable for the post.

Conclusion

Getting a redundancy exercise wrong can expose an employer to a claim of unfair dismissal. Deciding on and applying the selection criteria can often be the most difficult part of the redundancy exercise and it is clear from the two cases cited above that different criteria can be adopted by the employer dependent on the stage that has been reached in the exercise, that is:

  • In determining which employees are at risk of redundancy, the selection criteria must be objective and capable of independent verification, measurable against past performance;
  • When adopting selection criteria for considering which ‘at risk’ employees might be offered alternative employment, the employer can adopt a much more subjective approach in deciding who would be the best person for the job going forward.