Redundancy and Dismissal: Shaping New Law into Highly Developed Advice for Employers 19 November 2014 Selection Criteria How do you draft fair redundancy selection criteria - both paper-based and interview-based? What if employees have the same job titles but different sector experience which makes their roles more bespoke? 1.1 Two questions rather than one! 1.2 Putting together the right selection criteria is a key part of the redundancy process. 1.3 The obvious aim is to keep the best employees for the business going forward. However just picking the employee who the manager thinks is the weakest will be seen as too arbitrary and lead to a finding of unfair dismissal. 1.4 So the employee was unfairly dismissed in Williams v Compair Maxam 1982 when the selection was based on "who, in the opinion of the manager concerned, would keep the company viable". Similarly in Smith and others v Haverhill Meat Products Ltd 1985 the employers were wrong to simply retain employees who were "best suited for the needs of the business under the new operating conditions". Whilst selection on the grounds of "attitude" was described in the case of Graham v ABF Ltd 1986 as "dangerously ambiguous and vague". 1.5 The cases clearly highlighted the principle that criteria should be measurable, rather than just being based on someone's personal opinion. The criteria should be objective. 1.6 Typically objective criteria will include length of service; attendance records and disciplinary records. 1.7 The "last in first out" (LIFO) selection method used to be seen as a common and popular method of redundancy selection and was often used as the sole criterion. However with the introduction of age discrimination laws its use as the dominant criterion has greatly reduced. 1.8 Although initial doubts that it would be unlawful to apply in any situation have proved wrong where it can be objectively justified - it will generally be viewed as acceptable only if used as part of a balanced set of criteria or as a "tie break" where all other factors are equal. 1.9 What is the justification? In Rolls-Royce Plc v Unite the Union 2009 two legitimate aims were identified - the maintenance of a stable workforce during a redundancy exercise, and the rewarding of loyalty. The means of achieving that legitimate aim were held to be proportionate in that length of service was only one of a number of different criteria used; it appeared fair, younger employees accepted it and importantly it had been agreed with the union. 1.10 Attendance records are regularly used although it will be important to check the records are accurate. 1
1.11 The reasons for the absence should also be taken into consideration. If it was pregnancyrelated illness, maternity or other family-friendly leave then it should be discounted. 1.12 Where an employee's absence is connected with a disability it may also have to be discounted. Selection on these grounds could be challenged on the grounds of disability discrimination. Whether the challenge will succeed will depend on whether the application of the procedure was objectively justified and discounting the absence period would not have amounted to a reasonable adjustment. 1.13 The period over which attendance is assessed may also be significant. While this is a question for the tribunal to decide, the period should be substantial, particularly where longserving employees are concerned. The employer should be satisfied that the period in question provides a snapshot which puts those in the pool on a reasonably level playing field. 1.14 Qualifications are generally fact based but are they relevant? It will be an option for the employer to consider. 1.15 Taking into account disciplinary records does not generally create a risk. Even where the employee has disputed the penalty the fact there is on record a warning can generally be taken into account. 1.16 The standing of the employee in respect of such criteria can easily be measured and the resulting score supported by reference to carefully maintained HR records. Even in the unlikely event that such records are patchy or do not exist it will be a factual investigation to record the employees score. 1.17 In some cases there will be records regarding performance and ability that can be used in the selection process, for example, performance appraisals. Where the employee has signed the appraisal form showing their agreement with the comments or has accepted the manager s suggestions it will be difficult for them to be later challenged in a selection process. 1.18 However problems can arise where appraisals have not been carried out regularly, or at all, for some or all of the staff in the pool or where appraisals have been carried out by different managers, not necessarily with the same approach. 1.19 In such cases, some form of assessment independent of the appraisals ought to take place. Scoring should be undertaken by more than one individual to minimise subjectivity. 1.20 How easy it is to measure performance will depend on the role in question. In some jobs, such as those involving sales or productivity targets, performance is inherently easy to measure. In other jobs, assessment of performance will require a subjective analysis of the qualities and the skills of the person 1.21 It may help to break down the task assessment into sub-headings for example the employees performance could be scored in relation to quantity, quality, attention to detail, results, initiative etc. 1.22 Immediately the relevance of these criteria is obvious they are focussing on what the business requirements are for the future. However the more weight that is given to this then the more subjective the results. 1.23 When looking at performance the business may want to use criteria such as flexibility; future potential and ability. Are these becoming too dangerously ambiguous and vague? 1.24 More recent case law has provided some reassurance that it will not be unfair to use such criteria. Provided the management can justify their subjective assessments, they will carry weight. The employer should not make the mistake of shying away from making subjective assessments altogether if the role in question calls for a subjective assessment to be made. 2
1.25 The answer is that subjective criteria may be acceptable if applied objectively 1.26 Let s look at some of the more recent authorities on this. In Mitchells of Lancaster (Brewers) Ltd v Tattersall 2012 the Employment Appeal Tribunal (EAT) held that selection criteria that involved a degree of judgement may be appropriate in some cases, provided they can be "assessed in a dispassionate or objective way". 1.27 The facts here were that Mitchells of Lancaster (Mitchells) operated a brewery and owned public houses. Mr Tattersall, the property manager, was part of Mitchells senior management team of five people. When financial cut backs were needed the company s directors discussed the five management roles and concluded that cutting the property manager role would have the least detrimental effect on the business as it was not a revenue-generating role. The directors considered the skills of all five SMT members and concluded that the other four had skills that offered the potential for revenue generation. Mr Tattersall brought an unfair dismissal claim. 1.28 The Tribunal taking the more traditional approach held that dismissal was unfair. It considered that the selection criteria were unacceptable because they were entirely subjective and based on the views of the directors rather than being objective selection criteria. 1.29 However the EAT disagreed finding that just because criteria of the sort applied were matters of judgment, did not mean that they cannot be assessed in a dispassionate or objective way. 1.30 In particular it made the following observation which could prove helpful to employers: 1.31 "The Tribunal in this case also criticised the criteria adopted by the Respondent because they were not capable of being scored or assessed or moderated in an objective and dispassionate way. Just because criteria of this sort are matters of judgment, it does not mean that they cannot be assessed in a dispassionate or objective way, although inevitably such criteria involve a degree of judgment, in the sense that opinions can differ, possibly sometimes quite markedly, as to precisely how the criteria are to be applied, and the extent of which they are satisfied, in any particular case. However, that is true of virtually any criterion, other than the most simple criterion, such as length of service or absenteeism record. The concept of a criterion only being valid if it can be scored or assessed causes us a little concern, as it could be invoked to limit selection procedures to box-ticking exercises." 1.32 The judgment showed that it is possible in particular with skilled or senior roles for an employer to take into account more subjective criteria to ensure that the business retained people with the skills and qualities needed to take the business forward. 1.33 In Nicholls v Rockwell Automation Ltd 2012 the EAT followed Mitchells and stated that: 1.34 Selection criteria are not limited to those which can be the subject of box-ticking exercises". 1.35 Mr Nicholls was employed by Rockwell as a field service engineer from 3 January 1989 until his dismissal by reason of redundancy on 20 August 2010. Since 2005 he had worked a 4- day week, Monday to Thursday, although did work some extra hours on Fridays, evenings and weekends. In June 2010 the company was looking to make cost savings and decided to make one redundancy from the 11 field service engineers and duly commenced a redundancy process which included detailed redundancy scoring criteria, much of which required subjective marking by managers. 1.36 The marking process was undertaken by one manager and checked by another who managed the employees on a day-to-day basis. Out of a possible total of 580, Mr Nicholls had the lowest score at 265. The next highest scoring employee had a score of 300. Following his dismissal for redundancy, Mr Nicholls brought a claim for unfair dismissal. 3
1.37 In deciding that the Mr Nicholls was unfairly dismissed, the Employment Tribunal undertook a detailed assessment of the scores given to Mr Nicholls by his managers. Upon assessment, the Tribunal found that the marks allocated to Mr Nicholls were lower than they should have been. 1.38 On appeal the EAT found that Mr Nicholls dismissal was fair. In assessing the reasonableness of any dismissal, the Employment Tribunal was not to investigate the facts underlying a dismissal and reach its own conclusions about those facts. 1.39 Provided that any managers act reasonably in undertaking the scoring exercise and could justify any scores attributed to a particular employee, it was not open to the Employment Tribunal to substitute alternative scores or its own view of what it would have done in the circumstances. 1.40 The fact is that there needs to be a fair and objective assessment of the subjective criteria. 1.41 The recent case of Swinburne & Jackson v Simpson 2014 highlights the issue extremely well. A firm of solicitors who made Mrs Simpson, the most senior solicitor in a department redundant. Despite her 20 years experience she was selected over a newly and other recently qualified solicitors. The Tribunal found that the redundancy selection criteria had been set up and applied unfairly by the senior partner, in that it was aimed at selecting Mrs Simpson for redundancy. 1.42 The EAT emphasized that the Tattersall and Nicholls cases did not represent a departure from previous case law, rather an underscoring of the existing legal position. 1.43 The issue here was not with the employer s flexibility in determining the selection criteria but that the senior partner who applied the criteria was unable to provide any persuasive or rational explanation as to why Mrs Simpson scored as she did. In summary, there was no apparent justification as to why Mrs Simpson who was evidently the most experienced solicitor was selected for redundancy over significantly less experienced and skilled colleagues. 1.44 Although the EAT, upheld the tribunal s finding that Mrs Simpson had been unfairly dismissed, they noted the practical realities facing employers when dealing with redundancy situations and that inevitably a degree of subjectivity is likely to feature in the application of selection criteria. The EAT judge put it this way: 1.45 The simple fact is in an ideal world all criteria adopted by an employer in a redundancy context would be expressed in a way capable of objective assessment and verification. But our law recognises that in the real world employers making tough decisions need sometimes to deploy criteria which call for the application of personal judgment and a degree of subjectivity. It is well settled law that an Employment Tribunal reviewing such criteria does not go wrong so long as it recognises that fact in its determination of fairness. 1.46 The key lesson from this latest statement of the law in practice is that Employment Tribunals should be slow to interfere with redundancy dismissals, providing a rational and sensible explanation can be provided for each stage of the process. 1.47 One of the other reasons that Mrs Simpson was able to successfully claim unfair dismissal was the finding that the employer had discriminated against her on the grounds of her age. 1.48 Any redundancy selection criteria that discriminate directly on grounds of sex (including pregnancy), fixed-term or part-time status, race, disability, sexual orientation, religion or belief will generally result in a finding that a dismissal is unfair in addition to a finding of unlawful discrimination. 1.49 Criteria that have an indirectly discriminatory effect are also likely to render dismissals unfair if the employer is unable to demonstrate an objective justification for the adoption of such criteria. 4
1.50 It can sometimes be overlooked too that there are certain reason for selection that will render the dismissal automatically unfair. So for example you have taken into account attendance and the employee has been absent due to their participation in trade union activities, or carrying out duties as an employee representative or for taking action on health and safety grounds. 1.51 There is the risk that the selection will be seen as being connected to the employee asserting a statutory employment right, for example, taking time off for dependants. 1.52 Is it any different where there are interview based criteria? If anything even greater flexibility is given to the employer. 1.53 In Samsung Electronics (UK) Limited v Monte-D Cruz 2011 a selection for retention exercise approach was taken the interview based criteria included: Creativity strategic focus continuous innovation; and teamwork/leadership. 1.54 The Employment Tribunal had found the dismissal was unfair as the criteria were too subjective. In overturning that decision the President of the Employment Appeal Tribunal, had stated that: 1.55 ""Subjectivity" is often used in this and similar contexts as a dirty word. But the fact is that not all aspects of the performance or value of an employee lend themselves to objective measurement, and there is no obligation on an employer always to use criteria which are capable of such measurement". 1.56 The less restrictive approach was also seen in Morgan v The Welsh Rugby Union 2011 where there had also been a reorganisation leading to some disappearing and the creation of new roles. 1.57 The two employees facing redundancy were interviewed for the new role. When Mr Morgan was not appointed he the selection process was unfair. The claim failed although Mr Morgan s application appeared strong on paper, the interview itself had played an important part in the selection process. The only issue was whether the procedure was within the band of reasonable responses bearing in mind that an employer's assessment of which candidate will best perform in a new role is likely to involve a substantial element of judgment. 1.58 Ironically though in Mental Health Care (UK) Ltd v Biluan 2013 the employer was found to have unfairly dismissed employees in a process that relied on interview only. 1.59 Rather than criteria competency tests normally used for the purposes of recruitment were used without input from the affected employees' managers and without regard to past appraisals. The EAT found this to be unfair, criticising the employer for its "blind faith in process". 1.60 In an attempt to avoid subjectivity and bias, the employer had developed a procedure that was unfair as being too objective it had led to it losing touch with common sense and fairness. 1.61 The second question? What if employees have the same job titles but different sector experience which makes their roles more bespoke? Can be answered quickly. 5
1.62 Firstly if we have bespoke roles that are disappearing then it does suggest that the pool could reasonably be found to be smaller and even be limited to one individual. 1.63 However if there were a pool containing employees with various amounts of experience from different sectors then again the criteria could be formulated to assess what will be the most useful for the business going forward. 1.64 There would be various means to do this, for example breaking down the experience and skills criteria to awards more marks for those that have the experience in the relevant sector or giving more weight to the experience that is more relevant. Either will be a transparent and fair means of dealing with the situation. 1.65 Conclusion 1.66 As is so often the case with employment law, there is no one size fits all approach to redundancy selection criteria. The selection process needs to be tailored to fit the particular circumstances. 1.67 However an Employment Tribunal should not substitute the selection criteria it would have chosen for those used by the employer. It can interfere with the employer's choice only when the criteria used are those which no reasonable employer would have used in the way that the particular employer did. The question that should be asked is whether the criteria the employer has chosen are within the "band of reasonable responses". 1.68 This means that management is in a powerful position to ensure that the person that they view as the weakest and who the business will miss least will be the one selected through the criteria adopted. 1.69 So whilst the starting point may still be the comments made some 32 years back in Williams v Compair Maxam 1982 that criteria should so far as possible be objective the law does now recognise that a degree of subjective judgment in the criteria is commercially inevitable and legally acceptable. 1.70 Indeed as well as making commercial sense the subjective criteria can in some situations be better. Take for example the difficulties that the objective criteria caused in the case of Eversheds v De Belin 2011. The employee who had been absent due to maternity leave had been scored with maximum marks under the criteria which could not be measured due to her absence in the previous 12 months. Her male colleague who had as a result been selected for redundancy successfully brought a claim that this was unfair and amounted to discrimination against him 1.71 In terms of what to do in practice - look at the results you want to achieve what are your main aims and how will the redundancy exercise best meet this aim? The criteria should be formulated to meet the ultimate requirements of the business. Legal advice may be taken from your solicitor regarding the legality of the criteria chosen and the weight given to each criterion which would be privileged - so the business should be in the best shape to cope with the reduced numbers. 6